Fortis to issue warrants, FCCBs to fund Parkway acquisition

Fortis to issue warrants, FCCBs to fund Parkway acquisition

New Delhi: Asia’s largest hospital network Fortis Healthcare Ltd will raise money through warrants and foreign currency convertible bonds (FCCBs) for its newly acquired 23.9% stake valued at Rs3,118 crore in Singapore-based Parkway Holdings Ltd.

Having now gained a strong foothold in Asia, the company’s next phase of growth will come from beyond the continent; it will also continue to scout for acquisitions in India. Parkway has a network of 16 hospitals having 3,400 beds spread across Singapore, Malaysia, Brunei, China and the United Arab Emirates.

Two of the Fortis nominees on Parkway’s board will relocate to Singapore, including Malvinder Mohan Singh, currently the group chairman of Fortis, who will take on the additional role of the chairman of the board of directors of Parkway, the firm announced at a press conference in New Delhi on Friday.

In what analysts view as an expensive deal, Fortis will pay $685.3 million (Rs3,118 crore) to acquire the 23.9% stake from investment firm TPG Capital and will get four seats on the Parkway board.

“We will pay for the deal through the already approved warrants issue, FCCBs, internal accruals as well as the money left from our rights issue," Singh said. “We have a nine crore shares warrant issue outstanding, through which we can raise almost Rs1,700 crore at the current market price."

Fortis raised Rs1,000 crore from a rights issue to fund its acquisition of 10 hospitals from Wockhardt Hospitals Ltd. It also has approval to raise up to Rs1,250 crore by selling FCCBs. While the process to raise this money can be completed within the next two months, for now the company will take a bridge loan to pay for the acquisition.

“This is a very expensive deal. While it may be good in terms of business expansion, financially it is over-valued," said a Mumbai-based analyst. “Plus, Parkway is already a very well-run business, so where will the synergy be? What will Fortis bring to Parkway that is not already there?" The analyst declined to be named because he is not authorized to speak with the media.

Fortis is, however, optimistic about leveraging capabilities to grow further and establish a global presence.

“The potential synergy benefits from the integration includes multi-specialty access to cutting-edge technology in stem cell therapy, exchange of human talent and high brand equity," said Shivinder Mohan Singh, managing director of Fortis.

The deal enables Fortis to establish a presence across Asia, increasing its network to 62 hospitals that could host 10,000 beds.