Manipal revises offer for Fortis Healthcare ahead of key board meet

The board of Fortis Healthcare will decide on four competing bids on Thursday, including a revised offer from TPG-backed Manipal Hospitals, which will enhance the company’s valuation and will offer immediate financial support.

In the third offer so far, TPG-Manipal has valued Fortis’ hospital business at Rs 63.22 billion, 4.31 per cent higher than its April 10 offer. It has also offered to arrange financial assistance of up to Rs 7.5 billion to take care of the hospital’s immediate liquidity concerns. Manipal Hospital said that it had received a letter of intent from ICICI Bank to provide credit facilities.

The revision of bid term was done to give an explicit guarantee of immediate financial support to Fortis, as the same was being offered by competing bidders. Others in fray are Hero Enterprise-Burmans and IHH Healthcare. China’s Fosun group has given a non-binding bid and their offer would not be considered.

With its latest offer, TPG-Manipal is valuing Fortis at Rs 161 per share, India Infoline (IIFL) said in an investor note.

Manipal-TPG have also proposed to buy Fortis Hospital’s 5 per cent stake in its diagnostic arm, SRL Diagnostics, in addition to around 30 per cent stake in the firm from existing private equity investors for around Rs 11.13 billion. The purchase of 5 per cent stake directly will enable Fortis to repay overdue loans. 

In return, Manipal-TPG wants to appoint a majority of directors on the board of SRL and control at least 51 per cent voting rights in SRL along with Fortis Healthcare.

In its revised bid, Manipal Hospitals said it would launch an open offer to acquire up to 26 per cent shares after the merger of Fortis and Manipal hospital business at a price not less than Rs 121 per share. 

“This is the most complex among all the deals received by Forits, as it has an additional requirement of having a major say in SRL’s matters. Manipal Health will also get listed publicly, as it becomes a part of the resultant entity of Fortis plus SRL plus Manipal Health,” IIFL said.

The proposed sale of Fortis Hospitals has attracted interest from multiple suitors from India and abroad has come under scrutiny of investors and proxy advisory firms. Japanese drug maker Daiichi Sankyo has moved an application before the Delhi High Court to restrain the sale of Fortis. The court will hear Daiichi’s application for interim relief on May 14, said drug maker’s counsel Amit Mishra.