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Fosun targets Fortis: A white knight or a dark horse?

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Fosun targets Fortis: A white knight or a dark horse?
The emergence of Chinese conglomerate and serial acquirer Fosun International as the latest bidder for a stake in the beleaguered Fortis Healthcare is intriguing but not unexpected. Fosun’s surprise and audacious move for Hyderabad-based injectables maker Gland Pharma last year marked its entry into India. It outbid US drug giant Baxter in the final stages, handing out a cheque of over a billion dollars to the founders of Gland and buyout firm KKR.

Fosun has offered Fortis an initial funding of Rs 100 crore in 45 days and an investment of up to Rs 2,300 crore against an equity holding that will not extend beyond 25%. The primary infusion of capital, Fosun said, would be made at Rs 156 per share (Re 1 higher than Manipal‘s offer) subject to successful completion of the due diligence exercise in about three weeks.

Piece in a game
As with the Gland purchase, the bid for Fortis is a move to string together a global network of production facilities with an expanding pool of patients. On board Fortis, Fosun can gain experience and expand into the steadily growing Indian healthcare market, now getting an even bigger push from the BJP-led government’s high-decibel programme to make available health insurance to 500 million citizens.

The Gland deal enabled Fosun’s access to complex injectables technology that complements its expertise in high-volume manufacturing and help expand access to the global healthcare market.

String of acquisitions
With its diverse business interests, ranging from Lanvin, a French luxury brand, to an English football club Wolverhampton Wanderers, Fosun’s transformation into a global empire is regarded as a picture of China’s economic prowess. Last year, the conglomerate focused on acquiring Sisram, an emerging Israeli medical technology company.

In January, it joined hands with fellow Chinese firm Sanyuan to acquire French margarine maker St Hubert. Fosun’s journey into the latest medical breakthroughs include FosunKite, a research enterprise that offers the revolutionary advanced cellular immune therapy, CAR-T, in China.

The dealmaker chairman
At the nucleus of Fosun’s rapid expansion into a global business group is its chairman Guo Guangchang. With Guangchang at helm, Fosun has grown in the past 25 years, mostly on the back of acquisitions that logically fitted into its core businesses.
Often known as China’s Warren Buffett, Guo Guangchang prefers to be his student instead. As much as he is seen as a newsmaker for his deals and buyouts, Guo Guangchang’s mysterious disappearance last year raised many eyebrows, only to be later rubbished by the company as rumors.

In a letter to shareholders last month, Guangchang said for Fosun, its vertical depth of industrial development and continuous enhancement of operational capability are now more important than the investments. Guangchang once said that running a business was like conquering a mountain. Will Mount Fortis be his next peak?

The many contenders
The stakes are high. Manipal Health, with PE firm TPG’s backing, appears to be the strongest contender for Fortis. The Fortis board has noted that it had reached binding-level discussions with Manipal. A week ago, following dissenting voices of a low valuation, Manipal raised its offer at Rs155 a share or a little over Rs 6,000 crore.

Then there is Sunil Munjal, promoter of India’s two-wheeler heavyweight Hero, who teamed up with the Burman family of the Dabur group to make an offer for an infusion of as much as Rs1,250 crore.

Integrated Healthcare Holdings (IHH), a hospital group of Malaysia, entered the ring again after backing out of active discussions with Fortis last June. However, it did not rule out negotiations in the future.

Even as the contest gets closer, rumours abound of more players pitching in to take over Fortis.
Can Fosun vault over these rivals with a sweetened deal? Come Thursday, all eyes will be on the board meeting of Fortis, which will name its next owner.



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