Fortis Healthcare has signed a definitive agreement to acquire the entire portfolio of assets of RHT Health Trust listed in Singapore. The proposed transaction involves the acquisition of all the securities of RHT — which owns the real estate assets of operating hospitals and clinical establishments of Fortis — for an enterprise value of Rs 4,650 crore.
Fortis had first unveiled the plans to buy back the assets in November last year and was expected to make a final offer by this month. A company official said the transaction would reach a final closure in the next six months even as bankers raised concerns on how Fortis — in the midst of financial difficulties and facing allegations of money diversions by the founders — would fund the deal. The official mentioned earlier said the company was confident of raising Rs 5,000 crore, as stated earlier, which would be deployed to buy RHT.
“Fortis had to make a definitive offer and they made it. The fact is that there is no money to fund this transaction right now,” said two people directly involved with the company’s fund-raising plans. Last week, a Bloomberg report said founders and billionaire brother Shivinder and Malvinder Singh took out at least Rs 500 crore (USD 78 million) out of the company they controlled without a board approval about a year ago. The report further said the company auditor, Deloitte Haskins & Sells, refused to sign off on the company’s second-quarter results until the funds were accounted for or returned.
Fortis denied these reports and said a wholly owned subsidiary had deployed funds in secured short-term investments as part of normal treasury operations. The repayment of these loans would be completed by the first quarter of next fiscal. Incidentally, the Singh brothers had announced their resignation from the Fortis board just before the controversy erupted. The founders said they were quitting the board following an adverse Delhi high court order allowing Japanese drug maker Daiichi Sankyo to force a Rs 3,500-crore arbitration award against them.
Fortis and its founders have been locked in merger discussions with TPG-backed Manipal Hospitals as part of the ongoing fund-raising moves. A merger deal — since the founders were not allowed to sell or alienate assets pending payments to Daiichi — was in advanced stages before balance sheet worries delayed the same. Previously, they have also had inconclusive talks with Malaysia’s IHH Healthcare and private equity investors like KKR & Co and General Atlantic Partners. Fortis on Monday sought another extension to report second quarter results, which will now be presented to the board by this month end.
The company said its acquisition of the Singapore trust would eliminate payment of rentals completely and improve its operating profitability and cash flows. When completed, the transaction would positively impact operating profit by Rs 270 crore, details from the exchange filings showed.
In 2012, Fortis had sold these assets to the trust to de-leverage its balance sheet and years of inorganic growth. It then leased back the hospitals to pursue an asset light model, but has now decided to revert to the traditional model of owning hard assets to fetch better valuation from any potential merger or fund-raising. - TOI