Deal To Sell Fortis Healthcare To Malaysia’s IHH Alive And Kicking: Exclusive

A recent fund raise by a subsidiary of Malaysia-based IHH Healthcare Berhad, the world’s second largest healthcare group, suggests the deal to acquire India’s Fortis Healthcare Ltd. is still on the table.

IHH unit Parkway Pantai Ltd., on July 13, 2017, proposed to raise up to $2 billion via a medium-term, multicurrency note programme.

The company’s stock exchange filing said “that proceeds from the issuance of the notes and perpetual securities shall be utilised for the Group's investments, capital expenditure and general corporate purposes”.

Interestingly, Parkway Pantai is the IHH unit that operates in India. After the acquisition of Continental and Global Hospitals in 2015, the company has seven hospitals and three feeder centres in the country, according to information available on the Parkway website.

Promoted by brothers Malvinder and Shivinder Singh, Fortis Healthcare owns 45 healthcare facilities and 314 diagnostics centres across India, Dubai Mauritius and Sri Lanka, according to information on its website.

The banker said the mandate to sell Fortis has been given to two investment banks. JM Financial Ltd. is said to be one of the bankers involved in finding suitors for the Indian hospital chain.

We do not comment on market rumour and speculation,” a Fortis Healthcare spokesperson said in an emailed response to BloombergQuint. “Whilst IHH is constantly evaluating growth opportunities in select geographies in Asia including India, which is our fourth home market, IHH is not, nor is it close to, concluding any negotiations or due diligence or transactions in India at this point in time," IHH Healthcare spokesperson said in an email, repeating the clarification the company sent to the Malaysian Stock Exchange on June 22. Email sent to JM Financial seeking confirmation remains unanswered.

Shares Sink, Promoters Sellers

Fortis has reportedly been on the block for several months with rumours abounding of deals with private equity players and other suitors. Media reports suggested IHH too was in the thick of negotiations with the Singh brothers.

On June 28, Economic Times reported that IHH pulled out on concerns surrounding an ongoing Rs 3,500 crore litigation that has frozen the Singhs’ shares in various businesses.

Japanese company Daiichi Sankyo had filed an arbitration proceeding against the Singhs alleging misrepresentation in the 2008 purchase of another of their companies - Ranbaxy India Ltd. Having won the case at the Singapore International Arbitration Centre, Daiichi has sought the help of Indian courts to collect the Rs 2,500 crore award payable by the Singhs.

The confusion surrounding the sale of Fortis Healthcare has hurt its share price considerably.

RHC has sold close to 12 crore shares in the open market since January 2017. As a result promoter holding in Fortis has dropped to 39.82 percent from 62.96 percent since Jan 2017, as per exchange filings.

What’s Next?

The deal with IHH is pending the demerger of Fortis’ diagnostics business, said the banker quoted above, adding that Parkway Pantai would be in a position to sign a non-binding agreement after the demerger.

Another person close to the deal said Parkway may be interested in one or both businesses.

In August 2016, the board of Fortis Healthcare approved the demerger of its diagnostics business into Fortis Malar, a listed subsidiary. The rationale for the transaction was to house the hospitals business and the diagnostics business of the group in two seperate listed entities.

But the demerger proceedings at the Chandigarh bench of the national Company Law Tribunal have run into objections by Daiichi Sankyo. The next hearing is scheduled for July 28.