Manipal-TPG revise bid for Fortis Hospitals, offer Rs160 per equity share

The takeover battle for Fortis was kicked off earlier this year when its founders lost control of their shareholding because of their mounting debts.

Fortis Healthcare Ltd. received a revised takeover offer from its first suitor, Manipal Health, 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 Rs 8358 crore ($1.3 billion), translating into Rs160 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 per share, totaling Rs 2100 crore, for short-term liquidity needs, according to the letter.

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 is scheduled for May 22.

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.

Intense race

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., Chinese conglomerate 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 Rs 156 per share from Fosun to IHH’s Rs 175 apiece. Each proposal also varies in structure. IHH has proposed making an immediate equity investment, and putting in more after completing due diligence. Fortis has said it will only examine binding bids, and Fosun’s is the only one with no binding elements.

Meanwhile, Jupiter India Fund and East Bridge Capital Master Fund, which own a combined 12.04% 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.