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The bid for Fortis may get hostile Even as the deadline to participate in the race to acquire Fortis got over on May 1, two of the eligible four suitors have filed revised bids, valuating its stock at Rs 175-176 a share. This is much higher compared to the first valuation of Rs 96.5 for the hospital business.

The TPG-Manipal combine had earlier offered Rs 121-122 per share for both the hospital business and SRL Diagnostics. Given competitive bids by the likes of IHH Healthcare, the Munjal-Burman group, Fosun, and KKR-Radiant, the Manipal-TPG group has been forced to revise its composite bid twice to convince Fortis shareholders.

IHH’s latest proposal includes an “immediate equity infusion” at a share price of Rs 175 per share and a subsequent equity infusion at a per share price not exceeding this.

IHH had earlier proposed a per share price of Rs 160.

The Munjal-Burman consortium proposes to invest Rs 1,800 crore. It will invest Rs 800 crore through a preferential issue of equity shares at Rs 167 apiece and Rs 1,000 crore through a preferential issue of warrants at Rs 176 each.

However, Manipal-TPG has still got one last shot left. It has the ‘right to match’ any competitive bid till May 6. The combine is expected to exercise its right and make a revised binding offer to take the pole position again, a source close to the development said on the condition of anonymity.

“While we note the revised bids that have been submitted for Fortis Healthcare, the fundamentals of these offers compared to TPG-Manipal’s proposition remain unchanged. Manipal, together with TPG, is the only partner that offers Fortis a clear path forward through synergies with our existing healthcare business, as well as deep expertise and experience in the Indian healthcare industry. We will continue to evaluate our position and determine the best opportunities for both our business and Fortis stakeholders, including shareholders, and we remain confident that we are the only partner with the both industry credibility and expertise to bring long-term value to Fortis”, Manipal responded to an ET Prime query on potential use of its right to match rival bids.

But will Manipal-TPG have the last laugh? May be, but that won’t be easy either.

The source quoted above said IHH Healthcare may challenge the shortlisted bid at the EGM for a hostile takeover.

Both IHH and TPG tried to get hold of Fortis earlier also. In 2017, both companies tried taking controlling stake in Fortis Healthcare when it was still under promoters’ control. While IHH tried independently, TPG joined hands with General Atlantic (GA). In 2014, the two companies have had a faceoff over Australia’s Healthscope, with IHH finally bowing out to the $5 billion demand by TPG and Carlyle for their stakes.

IHH is historically known to be an aggressive bidder. The Malaysian integrated healthcare company once held 10.85% stake in Apollo, India’s largest hospital chain. However, IHH later sold more than half of its stake in Apollo and started pursuing multiple assets in India. In 2015, it acquired 73.4% stake in Hyderabad-based Global Hospitals, a 10-hospital, 2,000-bed chain. IHH also took a majority stake in 750-bed Hyderabad-based Continental Hospital.

In March 2018, IHH also filed a Rs 5,500-5,700 crore bid to acquire Medanta-The Medicity, a super-speciality hospital in Gurgaon. Here it competed with Temasek, a Singapore-based investor that owns 18.11% stake in Manipal Health Enterprises (parent company of Manipal Hospitals) via its fully owned subsidiary, Sheares Healthcare.

This is not the first time IHH Healthcare has locked horns with Fortis. In July 2010, the Malaysian company offered $3.3 billion for Singapore’s Parkway Hospitals to out-run competitive bid by Fortis. In September 2014, Fortis agreed to sell its Singapore subsidiary, RadLink-Asia Pte and RadLink Singapore, to IHH at a valuation of S$137 million. However, the deal ran into regulatory hurdles and was not executed.

In the ongoing tug off war between these deep-pocket bidders — IHH and TPG — the proposed valuation may shoot up well beyond Rs 185 a share. This will surely convince the minority shareholders who were disappointed with a 22% undervaluation of the hospital business in original TPG-Manipal offer.

An e-mail to IHH seeking comment went unanswered.

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