Mumbai: After having made an offer to buy the hospital assets of Fortis Healthcare Ltd and seeking its board approval, Manipal Group promoter Ranjan Pai is gearing up for the shareholders’ meeting, which is expected in a month.
Pai won’t mind some resistance and believes that current shareholders are free to sell their shares to anybody who can offer them a better deal. He will of course put his views forward. The Daiichi arbitration will not affect the sale process, Pai claimed, as that factor gets ruled out as the original Fortis promoters do not have a large shareholding. Edited excerpts from an interview:
How are you proposing to acquire it?
Like we have mentioned in our investor presentation and press release... What we are expecting is the demerger of the hospital assets from the existing Fortis, and that will then get merged with Manipal, which will also lead to listing of Manipal. All the shareholders of Fortis will also get a shareholding in Manipal.
So, the demerged entity will also be the listed entity?
Correct. It will be. So, there will be Fortis and there will be Manipal Fortis.
I am just trying to understand will it be a three-step transaction?
So, the announcement will be the demerger of the assets and merger with Manipal and then we will also buy 51% of SRL of which 20% will come from Fortis and 31% from the existing PE investors.
What will be the total deal value in terms money terms?
Manipal Education and Medical Group and TPG will invest Rs3,900 crore.
How much stake does it translate for you in the new entity?
Then you will have to do an open offer itself?
It may not need an open offer because it is a merger. We are not sure whether it will be. But, if it has to be an open offer, we will be open to do it.
So, Fortis becomes a holding firm?
It will become a holding company but it will have 36% stake of SRL.
Why did you not directly merge yourself with Fortis instead of ...
Given all the investigation and SFIO (Serious Fraud Investigation Office)... that is going on, we felt that this may be the best option that we could do with.
Do you anticipate any opposition from Daiichi or minority shareholders?
This has to be approved by all the shareholders. It will only happen if they vote for it. It is not relevant to this company anymore.
When is it likely to be put on vote?
They will probably call for the EGM (extraordinary general meeting) in the next 30 days or so.
Yes Bank has emerged as one big decision maker in this whole thing. Do you have their support?
We have not spoken to them about the details of the deal. Obviously, we can’t, given that it is a listed company. It is fundamentally a good deal for everybody. Over time, this is the best option for all shareholders. We are in talks with all of them. All the shareholders have right to express their opinion and vote for this. We will put across our view. If anybody is unhappy they can do what they want to do.
Have you reached out to Daiichi?
Daiichi, in this case, is not anymore there. It was there as long as the promoters had a large shareholding. Now that the promoters don’t have a large shareholding, it is unlikely that they will have any say in that.
What entity will the demerged hospitals will be held under?
It will be a new company. It will be a joint branding of Manipal and Fortis.
Of Rs3,900 crore, how much is for SRL?
Rs1,800 crore is for SRL and the rest for Fortis.
Everybody has been talking about consolidation in healthcare industry, what potential do you see there?
Consolidation is very important. Given that there is a lot happening in the industry from the talent, manpower perspective to buying drugs, buying consumables. There is enough of leverage that you can get with size. So, from that perspective, size is good in healthcare. The deal also complements our current markets. We are in the south and they are predominantly in the north, and that brings in a lot of strength. From that perspective, it really worked. Given what the industry is facing in terms of stent price cap, and some of the other things, it makes sense for us to have much broader revenue base instead of having just one or two special base.