Fortis-Manipal deal fails to cheer investors as valuations disappoint

Fortis, operating 31 hospitals, being valued lower than Manipal with 14 hospitals, has not gone well with the Street

The Fortis Healthcare merger news was made late Tuesday evening and the stock dropped 13.5 per cent to close at Rs 125.80 on Wednesday. A key reason for the disappointment is the valuation of Fortis’ hospitals business, which the Street believes is unfavourable for shareholders.

The deal involves merger of Fortis’ hospital business into Manipal Hospitals. Despite being a larger entity, the business is being valued at a lower price. The total deal value is about Rs 150 billion, wherein Fortis’ hospital business is valued at Rs 50 billion and Manipal Hospitals’ at Rs 60 billion; funds worth Rs 39 billion