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Malaysian hospital chain IHH Healthcare Berhad (IHH) has said it was nowhere close to concluding a deal with Fortis Healthcare. In a filing with the Malaysian stock exchange, IHH said, “IHH is not, nor is it close to, concluding any negotiations or due-diligence or transactions in India at this point in time.”
The statement came after the Malaysian bourse asked IHH to clarify on a news report of The Edge Financial Daily saying the two companies “are said to be in advanced stage of negotiations and due-diligence”. The report had quoted “a flurry of Indian news reports” on the matter. Several media reports have in the past months quoted IHH to be in the race for a stake in Fortis without official confirmation from both sides.
IHH’s Thursday clarification added: “The board of directors of IHH Healthcare Berhad wishes to inform that…IHH is constantly evaluating growth opportunities in select geographies in Asia, including India, which is our fourth home market.”
Malvinder Mohan Singh and Shivinder Mohan Singh, the promoters of Fortis Healthcare, got board clearance to bring in a strategic investor last year. At Thursday’s closing price, the company had a market capitalisation of over Rs 10,000 crore. The deal, which could see a divestment of up to 51 per cent in the company, could fetch over half that sum, including premium payable for ceding control.
The brothers have been in talks with various investors, including private equity investors, for the past several months. However, a protracted legal battle with Japanese drug maker Daiichi Sankyo has cast a shadow on these talks.
On Wednesday, the Delhi High Court, which is hearing Daiichi’s plea for enforcement of a Singapore arbitration tribunal award that directed the brothers to pay close to Rs 2,500 crore, said the brothers could go ahead with the stake sale on the condition that “the disclosed value of their unencumbered assets will remain unaffected”.
While sources in the legal fraternity suggested that this condition could have given jitters to IHH and was a potential deal breaker, a source close to the brothers maintained that it was, in fact, positive and that they are close to inking a deal. “The Singh brothers are in talks with both IHH Healthcare and TPG for a stake sale at present,” the source said.
The source added that the paperwork for the deal will take three weeks. “The stake sale will include Singh brothers shedding 51 per cent in Fortis Hospitals and SRL Diagnostics. It is not clear whether this will happen in two tranches or one. The one who has done their due diligence and paper work better will clinch the deal,” the source said. The brothers control Fortis through a two-tier structure. RHC Holdings has an 80.67 per cent stake in Fortis Healthcare Holding, while Oscar Investment holds the remaining 19.33 per cent. Fortis Healthcare Holdings in turn has a 52.5 per cent stake in Fortis Healthcare.
All this while, the case against the brothers at the Delhi High Court was worrying even those PE players who were interested in buying a stake in Fortis. The high court cleared the doubts, the source added.