An employee in protective clothing is reflected in equipment. (Photographer: Dhiraj Singh/Bloomberg)

IHH Sees Fortis Complementing Its India Business as Race Hots Up

(Bloomberg) -- IHH Healthcare Bhd., which has submitted a revised offer for Fortis Healthcare Ltd., said a successful acquisition would complement its existing business in India as the race for the country’s second-largest hospital chain intensifies.

The Malaysian company will evaluate all options, Chan Boon Kheng, group head, strategic planning and business development, said in an interview Wednesday, when asked if the company will consider a voluntary open offer. IHH’s binding offer to invest 6.5 billion rupees ($98 million) through a preferential issue will give it a 8 percent stake in Fortis, with its subsequent investment increasing the holding to 32 percent, he said.

IHH operates eight hospitals in southern India, while Fortis has a strong presence in the northern part of the country. Asia’s most-valuable hospital operator this week revised an earlier offer Fortis’s board said it will only consider binding bids. At least five suitors are in the race for the hospital chain, including a company backed by private equity firm KKR & Co. and a TPG-backed company.

“We like the platform that Fortis Healthcare has built in India over the years,” Chan said in Mumbai. “We are impressed about the quality of clinical services and standard of services besides its footprint in India.”

The Malaysian company was always interested in Fortis and had held talks last year with a due diligence that was stopped in June, he said.

In addition to IHH, Fortis has proposals from TPG-backed Manipal Health Enterprises Pvt., KKR-backed Radiant Life Care Pvt., a unit of Chinese conglomerate Fosun International Ltd. and a joint offer by the Munjal family’s Hero Enterprise Investment Office and Burman Family Office.

BidderType of OfferValuation per shareDeal Type
Manipal HealthBinding160 rupeesSpin off hospital operations and merge with its own; Rights issue of up to 40 billion rupees of merged entity; to make open offer of merged entity at not less than 121 rupees apiece; acquire shares in unit SRL and back a loan
Munjals-BurmansBindingat least 156 rupeesInitial investment of 5 billion rupees via preferential share allotment; additional investment of 10 billion rupees via issue of warrants at 161.60 rupees apiece
IHHBindingup to 160 rupeesInitially invest 6.5 billion rupees via preferential issue; Non-binding proposal to invest 33.5 billion rupees also via preferential allotment after due diligence
FosunNon-bindingup to 156 rupeesInitially make an investment to help with cash needs of Fortis; follow up with a primary infusion; sought time for due diligence
RadiantBindingas much as 175 rupeesMakes binding offer to buy Fortis Mulund hospital for 12 billion rupees; Non-binding proposal includes separating hospital business into a new company with a value of 126 rupees a share; fund RHT stake acquisition via rights issue; sell SRL with the aim to fetch as much as 45 billion rupees giving Fortis the maximum value

The fight over Fortis kicked off after the shareholding of its founders, Malvinder and Shivinder Singh, slid to less than 1 percent as lenders seized stock they’d put up as collateral. The brothers had resigned from the board in February, a day before Bloomberg News reported they had taken at least 5 billion rupees out without board approval. India’s fraud watchdog and market regulator have since started investigations into the financial irregularities at the company.

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