Manipal-TPG revises offer for Fortis, raises value to Rs 83.58 billion

After Malaysia’s IHH Healthcare and Hero Enterprise-Burman Family sweetened their offers for the beleaguered Fortis Healthcare assets on last Tuesday, the last day for submitting bids, Manipal-TPG too raised their offer on Sunday. 

The expert advisory committee, led by former PwC Chairman Deepak Kapoor, will meet on Tuesday to evaluate the offers and place their recommendation to the board on Thursday. 
TPG-backed Manipal has valued Fortis at Rs 83.58 billion (which translates into Rs 160 per share) and has proposed to merge into Fortis, creating the largest healthcare platform in the country. 
The offer values Manipal Health Enterprises at Rs 60.7 billion. Once the merger becoming effective, the shareholders of Manipal Health Enterprises shall be issued equity shares in Fortis in accordance with the swap ratio for the merger.
Moreover, Manipal-TPG has also proposed to subscribe to equity shares of Fortis for an amount of Rs 21 billion (at Rs 160 per share preferential allotment). The proceeds would be used to meet working capital requirements, repay existing loans and partly fund the acquisition of assets from RHT Health Trust. The preferential allotment would be subject to receive regulatory approvals, which includes Competition Commission of India  (CCI). 

ALSO READ: Fortis shareholders approve acquisition of RHT Health Trust assets

Further, Manipal proposed to buy the stakes held by private equity firms in SRL, the diagnostic arm of Fortis Healthcare, at Rs 36 billion. After the transaction, the SRL board will be restructured and Manipal-TPG wants to appoint a majority of directors on the reconstituted board.

After the merger, Fortis will undertake a rights issue to raise additional capital. The purchase of the Singapore-based RHT's assets will be funded through debt, apart from the proceeds from the preferential allotment. 

Manipal-TPG, however, has said their new offer does not require any further due diligence. The proposal is binding and valid until May 15. This is the fourth offer from Manipal-TPG for Fortis. 

Ranjan Pai, managing director and chief executive officer, Manipal Health Enterprises, said this was a ‘compelling offer’ from their side that took care of all the medium- to long-term needs of Fortis and created value for the shareholders. “We are bringing in value addition of about Rs 90 billion and that too without altering any structure of the Fortis,” he said, adding that the latest offer from Manipal-TPG not only takes care of the immediate liquidity issue of Fortis but also takes care of the PEs in SRL (which is a liability for SRL), buy back the RHT assets (organise debt for the transaction if required), gives an opportunity to shareholders to participate through a rights issue. “On top of it, it gives Fortis a promoter. It needs one at the moment, unlike many other bidders, who are looking at simple fund infusion,” Pai said. 

Bidding for Fortis closed on May 1. Manipal Hospitals, however, had a chance to revise its offer until May 6, based on the bids received till May 1. This is as per ‘obligations’ towards Manipal-TPG consortium, Fortis had said.

Last week, IHH had submitted a revised offer, valuing Fortis at Rs 175 per share, up from its earlier offer of Rs 160 per share. Sunil Kant Munjal of Hero Enterprise, along with Anand and Mohit Burman, submitted a revised binding proposal to invest Rs 18 billion directly into Fortis without due diligence.

The Hero Enterprises-Burman Family office duo have also revised the validity of its offer till May 15 and have now sought three board seats instead of the two. 

The Munjal-Burman has also objected to the bidding process and has asked for an equal opportunity to all bidders without any unfair advantage to one party. 

Fortis has appointed Arpwood Capital to advise the board on various sale bids.

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