Hero, Dabur promoters submit joint bid to buy stake in Fortis Healthcare

Propose Rs 12.5 bn investment to meet hospital's urgent financial needs

Promoters of Hero Group and Dabur India have submitted a joint bid to acquire a significant stake in Fortis Healthcare, intensifying the battle for control of the group’s hospitals and diagnostics business.

Sunil Kant Munjal of Hero Enterprise and the Burman Family Office, which own around 3 per cent stake in Fortis Healthcare, have proposed to invest Rs 12.50 billion in the company in two tranches.

This infusion, they said, will help in addressing urgent financial needs of the company, which is said to have only Rs 700 million in liquid cash.

Based on Thursday’s closing price (Rs 153.80) on the BSE and the current market cap (Rs 79.76 billion), the infusion will give Munjal and Burman group entities an additional 15.6 per cent stake in Fortis Healthcare.

The surprise public announcement for stake purchase comes amidst a tussle between Manipal Hospitals and Malaysia-headquartered IHH for Fortis Healthcare assets.    

As part of the offer, the Munjals and the Burmans have proposed to invest Rs 5 billion immediately through preferential allotment of shares and an additional Rs 7.5 billion after completion of due diligence in three weeks.

Fortis Healthcare notified the stock exchange it was evaluating the unsolicited binding offer.

“Our offer is in the best interests of Fortis Healthcare. In fact, all those connected with the company’s ecosystem, its shareholders, patients, their attendants, the community and the public at large, in addition to the lenders, suppliers, doctors, medical and non-medical staff, will benefit from it. We are investing in the company and our aim is to create value for all stakeholders,” Munjal said in an offer letter to the board.

“Our offer does not envisage any changes in the current structure, operations and assets of the company and is simple and is almost immediately implementable,” said Anand Burman, non-executive chairperson of Dabur India.

The Munjal family first expressed interest in the merger and acquisition transaction with Fortis Hospitals last July, but discussions remained futile. The two families approached Fortis Hospitals again last month for fund infusion. 

According to the proposal, the funds infused by the families will be used for paying dues and employees’ salaries. The groups have also sought one board position.

Over several months, a host of private equity firms and hospital chains have been on the lookout to acquire control of Fortis. Last month, Fortis and Manipal Hospitals announced a merger, thereby creating the largest provider in India of health care services by revenue.

It ran into rough weather, with financial investors and hedge funds protesting the valuation offered for the Fortis group’s hospitals business in the deal. On Tuesday, Manipal revised the terms, with a valuation of Rs 155 a share. 

IHH Healthcare Berhad, the world’s second-largest health care group, had entered the context to acquire control of Fortis Hospitals. It had increased the price earlier offered by Manipal Hospitals.

IHH gave a non-binding offer to the board of Fortis Healthcare on Wednesday, at a valuation of Rs Rs 160 a share for its hospitals and diagnostics business. IHH had sought time from the Fortis management to update its due diligence.

Sources said IHH was doing due diligence with Fortis for nine months and was working closely with the company. “It is surprising they have made a non-binding offer at this stage and one which says it values Fortis shares at up to Rs 160 apiece. TPG-backed Manipal has made a binding bid,” said a source. He added it only shows lack of conviction from their side and that after eyeing Fortis for the past 18 months, they have not placed a binding bid even after TPG-Manipal revised its offer.