The TPG Capital-Manipal Health Enterprises combine and IHH Healthcare Bhd could acquire shares from the public and banks to wrest control of Fortis Healthcare
Mumbai: A bidding war is brewing for control of Fortis Healthcare Ltd, the hospital operator that has been without a defined promoter ever since the shareholding of founders Malvinder and Shivinder Singh dropped following the sale of their pledged shares by some lenders in February.
The TPG Capital-Manipal Health Enterprises combine and IHH Healthcare Bhd could acquire shares from the public and banks to wrest control of Fortis, two people directly aware of the ongoing negotiations said, requesting anonymity. Currently, 80% of Fortis’s shares are with the public while 20% of pledged promoters shares are held by lenders Yes Bank Ltd and Axis Bank Ltd.
The acquisition of Fortis’s stock in small quantities will strengthen their position if they have to make an open offer for the target company’s shares from the public. “In this scenario, it is possible that both TPG-Manipal and IHH may come up with competing open offers," said one of the two people cited above.
Under current regulations, acquisition of a 26% stake in a listed company has to be followed by a mandatory open offer. Regulations also stipulate that in a creeping acquisition situation, an acquirer with a stake below the 26% threshold is obliged to make a mandatory open offer if he or she is granted any special rights by the company’s board.
“Both sides are currently engaged in talks with Yes Bank and Axis Bank who together hold 20% of the pledged promoters share in Fortis as this will be key to gaining control of the company," said the first person cited above. “Yes Bank, which owns a 17% stake in Fortis, may seek a minimum 15% premium but the numbers can change," the first person said. Yes Bank declined to comment, while an email sent to Axis Bank remained unanswered until press time.
For both TPG-Manipal and IHH, a potential buyout of Fortis is likely to close at a significantly lower price than what they were previously negotiating with the Singh brothers. Mint had reported in June last year that the Malaysian–Singaporean company, IHH Healthcare, was close to buying 26% in Fortis from Malvinder and Shivinder Singh at a $2.9 billion valuation for Fortis and unit SRL Diagnostics.
The transaction did not go through following a court ruling that stayed the sale of unencumbered assets of the Singh brothers.
Mint had also reported in January last year that TPG Capital had submitted a non-binding bid for a controlling stake in Fortis Healthcare and SRL Diagnostics, but the transaction did not materialize due to differences over valuation.
“In the earlier discussions, IHH had offered close to Rs200 per share while TPG’s offer was in the range of Rs220 to Rs240 per share made to Fortis promoters but the transaction did not go through due to the ongoing legal battle Fortis promoters had with Daiichi Sankyo," said the second person cited above, adding: “the pricing per share that is now being discussed is close to Rs170 share, which also includes the control premium. Fortis Healthcare currently has a market capitalization of Rs7,908 crore and liabilities of Rs3,406 crore against revenue of Rs4,573 crore in FY17, according to its audited financial results.
Responding to Mint’s request for comment, a spokesperson for IHH Healthcare said the company does not comment on market speculation. “We will update the market if there are any material developments." Both TPG Capital and Fortis Healthcare declined to comment. An email sent to Manipal Hospitals remained unanswered until press time.