TPG offer for Fortis Healthcare too low; here is why

Minority shareholders of Fortis Healthcare are upset with the valuation of the company in the deal with TPG-backed Manipal Hospital Enterprises (MHE). Sources tracking the deal told DNA Money that as per the deal, the value of Fortis comes to around Rs 135 per share as against close to Rs 200 initially pegged at a few months ago. A source said that Rs 97 has been arrived at for the hospital business while the balance is for SRL Diagnostics.

If RHT Health Trust is included, then the value per share comes to approximately Rs 155.

Following the low valuation, the minority shareholders are unhappy and intend to form a group to oppose the deal.

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"In case, there is stiff resistance from the minority shareholders, TPG Capital-MHE may have to sweeten the deal," said a source.

Eastbridge Capital has mopped up just over 10% shareholding in Fortis Healthcare and is trying to gather support from other minority shareholders to form a collective group of shareholders holding 30% stake in the company.

Initially, the expected value was close to Rs 200 per share, however, as the round of discussions progressed, the valuation kept decreasing to around Rs 180, followed by about Rs 160.

On Monday, Fortis Healthcare closed at Rs 127.10, which was Rs 3.70 more than its previous closing of Rs 123.40 per share on Wednesday. However, the stock has fallen sharply on Wednesday from the earlier day's close of Rs 142.45, when the deal was announced after market hours.

With Malaysian IHH Healthcare Berhad too in the fray, it is unclear if the Malaysian firm would make an attempt to offer a better price and disrupt the acquisition process.

Secondly, YES and Axis Banks, jointly holding around 18%, have committed their stake to TPG-MHE in Fortis Healthcare, however, the commitment valuation is unknown.

Unless IHH Healthcare Berhad and YES Bank do not make an attempt to better the deal, the minority shareholders may make a move to call for an extraordinary general meeting to get their voice heard.

INSUFFICIENT DOSE

• The value of Fortis comes ot around Rs 135 per share as against Rs 200 pegged at initially  
• If RHT Health Trust is included, then value per share comes to approximately Rs 155  
• Minority shareholders are unhappy and intend to form a group to oppose the deal