IHH may make hostile bid for Fortis, board of troubled co likely to accept revised offer of Manipal Group

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New Delhi: The battle for the control of Fortis Healthcare is expected to intensify as Malaysian giant IHH Healthcare plans to make a hostile bid to buy a majority stake in the Indian hospital chain if its board doesn’t consider its expression of interest (EOI) — presented on April 11 — favourably.

Last week, IHH offered Rs 160 per share for Fortis Healthcare, valuing the company at Rs 8,300 crore, compared to Manipal Group’s offer at Rs 155 per share and Hero Enterprise-Burman family’s combined offer at Rs 156 per share in the first of a two-stage offer. On Monday, Fortis Healthcare’s stock closed 2% down at Rs 149.
IHH may make hostile bid for Fortis, board of troubled co likely to accept revised offer of Manipal Group
The Fortis board is scheduled to meet on April 19 to decide on the three offers. Sources said the board is likely to reject the EOI made by IHH and may accept the revised offer of Manipal Group. According to sources, IHH is likely to revise its offer to acquire at least 26% shares of the company against the wish of the company’s board. If IHH acquires a large block, it can resist the board’s decision to accept Manipal Group’s offer in the shareholders’ meeting.

On April 12, the Munjals of Hero Group and Burmans of Dabur made a proposal to invest Rs 1,250 crore in two tranches in Fortis Healthcare through preferential issues at Rs 156 per share, or a price under Sebi norms. Sources said that the offer from the Hero Enterprise-Burman Family office is unlikely to find favour with the board as it does not provide for the future growth path of the company that is operating in the capital-intensive healthcare business.

A source close to the development said that Manipal Group’s offer is not weaker to the existing IHH offer. In the revised offer, Manipal Group has pegged the hospital business of Fortis Healthcare at Rs 6,061 crore against the original offer of Rs 5,003 crore. Besides the hospital business, Fortis Healthcare holds a 57% stake in SRL Diagnostics, the valuation of which is around Rs 2,052 crore as Manipal Group is ready to pay Rs 720 crore for a 20% stake in SRL.

Therefore, the total valuation of Fortis Healthcare according to the Manipal Group’s offer is Rs 8,113 crore. Besides this, the source said the merger of the hospital business of Fortis Healthcare with Manipal Group would bring “synergy” to achieve a higher growth rate in the future. In its offer letter to Fortis, IHH said, “IHH reserves the right to pursue all necessary steps to ensure that the shareholders of Fortis are provided with the opportunity to realise the value inherent in our proposal, including the right to revise the indicative offer price in any manner IHH deems fit.”

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