Fortis Healthcare takeover saga: Now TPG-Manipal makes fresh offer

Three days after the Fortis Healthcare board chose the Hero Enterprise-Burman offer, the Manipal Hospitals-TPG combine has come up with a revised bid, raising its earlier offer by 12.5 per cent. 

In its latest offer, the Manipal-TPG combine has proposed a preferential allotment of Rs 180 per share. 

The offer values Fortis at Rs 94.03 billion. The combine has proposed merger of Fortis' hospital assets with Manipal hospitals, which is being valued at Rs 60.70 billion for the purpose of the merger. This is the highest offer made to date. Manipal Hospitals-TPG have further agreed to underwrite the rights issue.

Apart from highlighting the long-term benefits in its proposal, Manipal Hospital in its offer letter to the Fortis board also referred to the negative reaction of certain shareholders to the board decision and challenge in securing shareholder approval for Hero Enterprises offer.  

It also said in the letter that the modified offer was not only financially beneficial for Fortis stakeholders, it also combined the strengths of two leading healthcare services business in the country, which could potentially deliver an additional Earnings Before Interest, Taxes, Depreciation and Amortisation (Ebitda) of Rs 2 billion per annum. 

“The additional Ebitda from synergy benefits alone is worth an additional Rs 50 per equity share,” according to the letter. 

Ranjan Pai, managing director and chief executive officer of Manipal Health Enterprises Pvt Ltd, said it was upon investors and stakeholders to decide which offer was better for the healthcare chain. 

This is the fourth offer from Manipal-TPG for Fortis Healthcare. In their last offer they had valued Fortis at Rs 83.58 billion, which translated into Rs 160 per share). 

Fortis and Manipal Hospitals had on March 27 agreed on the merger of hospital assets and Manipal purchasing stake in SRL Diagnostics. The agreement has now been cancelled. 

“While all other bidders had time to make offers till May 1, Manipal Hospitals had five days exclusivity to make its bid. This allowed them to revise their offer. Now they have submitted a fresh bid again. We think this is just to frustrate the whole process,” said an executive from a rival firm.   

Meanwhile, proxy advisory firm IiAS has urged Fortis shareholders to vote in favour of the resolution to remove four existing directors — Harpal Singh, Brian Tempest, Tejinder Singh and Sabina Vaisoha — on the board. Existing board members are said to have favoured the Munjal-Burman investment in Fortis. An extraordinary general meeting (EGM) of shareholders is being held on May 22 to seek the removal of the four existing directors. 

According to media reports, few large institutional shareholders, too, were said to be backing the resolution proposed by East Bridge Capital and Jupiter Asset Management. These two funds hold over 12 per cent stake in Fortis Healthcare.

YES Bank, the largest shareholder in Fortis with a 15 per cent stake, said it could not comment on client or company specific matter.