(Bloomberg) -- Fortis Healthcare Ltd. received a revised takeover offer from its first suitor, an Indian company backed by private equity firm TPG, ahead of a board meeting to decide a winner in the bidding war for the country’s second-largest hospital chain.
Manipal Health Enterprises Pvt. has proposed merging with Fortis in a deal that will value the latter at 83.58 billion rupees ($1.3 billion), or 160 rupees a share, it said Sunday in a letter to Fortis board. While Manipal has proposed a rights issue of the merged entity, it has offered to subscribe for a preferential allotment of Fortis shares at the same price, totaling 21 billion rupees, for short-term liquidity needs, according to the letter.
“We want to be sensible, we don’t want to be irrational,” Ranjan Pai, chairman of Manipal Education and Medical Group, Manipal Health’s controlling shareholder, said in an interview Monday. “This price takes care of all the issues of the company.”
With the Fortis board set to meet May 10 to decide on which of the proposals to refer to shareholders for a vote, the race for the hospital chain is getting closer to the finish line. Still, the stockholders will have to decide on a motion to remove the majority of the board members before voting on the selected bid. An extra-ordinary meeting will be held May 22.
Shares of Fortis declined 1.1 percent to 156.15 rupees at 12:23 p.m. in Mumbai. They surged about 24 percent in April, their best month since February 2015.
The takeover battle for Fortis was kicked off earlier this year when its founders lost control of their shareholding because of their mounting debts. India’s fraud office began investigating the company after Bloomberg News reported people with knowledge of the matter as saying the founders had taken millions of dollars out of the company without board permission.
Fortis has since drawn international bidders intent on securing a place in one of the most under-served health-care markets in the world. India has about half a hospital bed for every thousand people, according to the Organization for Economic Cooperation and Development, even as faster growth than many other large economies increases patients’ ability to pay for better health care.
Manipal Health has offered to buy the stake held by private equity firms in SRL Ltd. at a price that values the Fortis unit at 36 billion rupees, subject to an agreement with the holders.
Fortis has also drawn offers from IHH Healthcare Bhd., Asia’s most valuable hospital operator, KKR & Co.-backed Radiant Life Care Pvt., China’s Fosun International Ltd. and a joint bid from an alliance of two Indian business families. Fortis has appointed Arpwood Capital to advise it on the offers.
The offers range from about 156 rupees a share from Fosun to IHH’s 175 rupees apiece. Each proposal also varies in structure. IHH has said it would invest immediately, and put in more after completing due diligence.
“Manipal and IHH seem to be the front runners,” said Param Desai, an analyst at Elara Securities Pvt. in Mumbai. “IHH’s 175 rupees per share seems to be the better bid. The benefit of going with Manipal is the synergies will be very substantial. Manipal has already established more hospitals.”
Fortis has said it will only examine binding bids, and Fosun’s is the only one with no binding elements. Manipal’s Pai said other rival bidders have offered smaller amounts at higher valuations.
Meanwhile, Jupiter India Fund and East Bridge Capital Master Fund, which own a combined 12.04 percent of Fortis, have put forward a motion to remove four Fortis board members and replace them with three others. While the three were inducted into the Fortis board, the four they sought to remove remain.
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