Fortis Healthcare sale: Manipal-TPG may emerge as biggest bidders even as rivals hike offers

The bidding war for Fortis Healthcare doesn’t seem to end. Hero Enterprise Investment Office-Burman Family Office and Malaysian IHH Healthcare Berhad hiked their offers for the Gurugram-based hospital chain on Tuesday. However, experts said Manipal Healthcare-TPG may offer the highest bid. MHE-TPG’s existing valid bid has pegged Fortis’s hospital business’ equity valuation at Rs 6,322 crore at Rs 161 per share, up from the previous Rs 6,061 crore (Rs 155 per share) and Rs 5,003 crore (Rs 135 per share).

The Munjal-Burman duo is now offering Rs 1,800 crore (without any due diligence) for three seats in the management, up from their earlier Rs 1,500 crore for two seats. They have proposed an upfront Rs 1,050 crore will be made and balance infusion of Rs 750 crore over the next four months.

IHH Healthcare, Asia’s largest and world’s second-largest private healthcare group has increased its offer by 9.38% to Rs 175 per unit. On April 24, it had offered Rs 160 per share for the Fortis pie.

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Last weekend, Fortis Healthcare’s Board had said that “Manipal and TPG consortium have the ability to revise their offer till May 6, 2018.” Thereby, one more offer is likely from Ranjan Pai’s end later during the week.

“With Munjals-Burmans and IHH Healthcare’s final offering in the public domain, MHE-TPG knows where their competitors stand and it will accordingly make a move by coming up with an offer in the range of Rs 176-178 per share,” said an industry source.

The same is likely to be entertained by Fortis Healthcare despite May 1 deadline that was put up for all other players, as the management has allowed MHE-TPG to submit their enhanced bid till May 6.

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The next Board meet has been scheduled on May 10 to deliberate and decide on the submissions made by the suitors as well as the advisory panel.

In its fresh offer letter, Munjal-Burman justified raising the bid; “based on our judgement of the sentiments of the shareholders and other stakeholders, we are now making out final investment proposal”. 

Sunil Kant Munjal added, “The proposed offer is a comprehensive solution to address the company’s needs, including the balance funding required for RHT transaction and an action strategy and achievable plan for the company’s SRL business. We believe that there is every reason for our investment proposal to be put forward to the shareholders for their urgent consideration.”

The latest bid by the duo pegs the value of the preferential issue of equity at Rs 167 per share for Rs 800 crore and the balance Rs 1,000 crore through the preferential issue of warrants for Rs 176 per share.

In its earlier offer, IHH was willing to immediately infuse equity of Rs 650 crore “without any due diligence” and in return sought for “immediate” access for legal and financial due diligence for subsequent equity infusion. The condition for paying Rs 650 crore was for payment towards dues to employees and creditors apart from servicing the debt. The subsequent Rs 3,350 crore was to be done post-satisfactory due diligence. The total infusion was Rs 4,000 crore.

IHH’s revised investment proposal works out to be Rs 4,375 crore at the price of Rs 175 per scrip. The Malaysian firm has capped the latest offer’s validity till May 15.

On Saturday, Fortis Healthcare’s Board had put a deadline of May 1 for submission of revised offers from all interested parties for the Expert Advisory Committee to evaluate. However, on Tuesday the consortium of Manipal Health Enterprises-TPG Capital did not come forward with their renewed plan.

By Ateeq Shaikh, DNA Money