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Munjal-Burman Backs Out from Fortis Bidding; IHH, Manipal-TPG in Fray

Malaysia’s IHH Healthcare and Manipal-TPG combine have put in fresh binding bids for cash-strapped healthcare chain while Munjal-Burman combine, which had earlier emerged as the preferred suitor for Fortis Healthcare, has backed out from the race. In a regulatory filing, Fortis Healthcare said it has fresh binding bids without specifying details. While Malaysia’s IHH Healthcare stated that it has put in binding bid, sources said Manipal-TPG combine have also put in their bid. The Munjal-Burman combine has, however, not submitted fresh binding bids on the last day, a source said. “The Board of Directors of the company has received Binding Bids on July 3, 2018,” Fortis Healthcare said in a BSE filing. The binding bids will be evaluated by the board in consultation with its advisors, it added. As per the fresh criteria, that was put up by the Fortis board on May 29, the potential buyer had to make a minimum investment of ₹15 billion into Fortis Healthcare by way of preferential allotment.

Apart from having a plan for funding the acquisition of RHT Health Trust (RHT), suitors should also have a plan for providing exit to private equity investors of diagnostic arm SRL. Among others key criteria, the bids had be unconditional as well as mention about the source of funds for the transaction and elaborate on the plans for retention of current management and employees. The backing out of Munjal-Burman combine from the race comes days after Fortis Healthcare announced that it has initiated legal action to recover about ₹5 billion of funds given as inter-corporate deposits (ICDs) to the firms controlled by Malvinder and Shivinder Singh. The loans were given without board approval and enough collaterals. The company had also stated that market regulator SEBI has also ordered a forensic probe into the company’s matters. The race for Fortis has witnessed several twists and turns over the past few months. The Manipal-TPG combine was the first to make an unsolicited non-binding offer for the cash-strapped healthcare chain on March 23, 2018.

Subsequently, Fortis board approved demerger of its hospitals business to be acquired by Manipal Hospitals and TPG Capital, along with the sale of 20 percent stake in diagnostics chain SRL Ltd in a ₹39 billion deal. Following the announcement, others suitors jumped into the fray with Munjal-Burman combine, Malaysia’s IHH Healthcare Berhad and KKR-backed Radiant Life Care also making binding offers. China’s Fosun Healthcare which had also joined the race however did not make binding bid for the company. The process saw the suitors revising their bids. In April, Manipal-TPG combine raised the offer for Fortis Healthcare Ltd by valuing the hospital business higher at ₹60 billion from the earlier equity valuation of ₹50 billion. The combine finally sweetened their offer with a proposal to invest in the company at ₹180 per share in the cash-strapped healthcare chain with a proposal to invest in the company, thereby increasing valuation of the company to ₹94 billion.

Malaysian firm IHH Healthcare Berhard had also revised its offer to directly invest in Fortis at ₹175 per share on May 1 from an initial non-binding offer to invest in Fortis at ₹160 per share. KKR-backed Radiant Life Care had also revised bid for Fortis with a binding offer to acquire its Mulund hospital for an enterprise value of ₹12 billion and a proposal to acquire stake in hospital business. The fifth bidder, Fosun Health Holdings, an arm of Fosun International, which made a non-binding proposal to invest a total of USD 350 million (over ₹22 billion) at a price up to ₹56 per share, had not revised its offer. The erstwhile board of Fortis accepted the offer by the Munjal-Burman combine to invest ₹18 billion in the company. However, when a new board was reconstituted after a group of institutional shareholders sought removal of four directors, the company decided to call for fresh bidding. From its first hospital at Mohali in 2001, Fortis Healthcare has grown to be a leading integrated healthcare delivery service provider in India. Currently, the company has 45 healthcare facilities, including projects under development, around 10,000 potential beds and 314 diagnostic centers in India, Dubai, Mauritius, and Sri Lanka. – Business Standard