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Fortis accepts IHH’s proposal over Manipal/TPG

The Board of Fortis Healthcare has unanimously accepted the binding bid from IHH Healthcare over Manipal/TPG. IHH has offered to invest Rs4,000cr by way of preferential allotment at Rs170/share, a premium of ~20% to the current market price.

The company has said that total four parties (IHH, Manipal/TPG, Hero/Burman and Radiant/KKR) were interested initially. However, the company received only two binding proposals from IHH and Manipal/TPG. We had earlier written that IHH is a front-runner in the takeover battle, which is likely to enter the last lap.

The board was advised on this transaction by Standard Chartered Bank, Arpwood Capital Luthra & Luthra Law Offices and Cyril Amarchand Mangaldas.

The board, as per the press release has evaluated the two bids upon various parameters such as 1) valuation, quantum of investment and schedule thereof 2) plans to address Fortis’ liquidity requirements, RHT acquisition and providing exit to private equity investors of SRL 3) vision and value proposition for Fortis and 4) simplicity of transaction structure, timelines, regulatory approvals required and financing arrangement).

The board has said that the it will seek shareholders’ approval soon.

The transaction is expected to be completed within seven business days post the shareholder’s approval and regulatory (CCI) approval. The CCI approval would take 60-75 days upon receipt of the shareholders’ approval.

IHH has proposed to invest Rs4,000cr, and its board believes that it addresses Fortis’ liquidity requirements, obligations towards RHT acquisition, and provides exit to private equity investors of SRL through a tender offer of ~Rs3,300cr at minimum price of Rs170/share.

Manipal/TPG had offered to 1) infuse Rs2,100cr through Preferential Allotment of shares at Rs160/share 2) acquire private equity stake in SRL for a consideration of Rs1,134cr 3) acquire RHT assets through the portion of preferential allotment and debt and to bridge the funding gap by launching a rights issue/QIP 4) merger of Manipal and Fortis.

We were of the opinion that in the second round of bidding, IHH was the most suitable acquirer compared with other bidders.

We look ahead for shareholder’s nod in a to-be announced meeting. It will be interesting to see if Manipal/TPG would go ahead and make another offer or speak with minority shareholders, which they did when the erstwhile board had selected Munjal/Burman over other bidders.

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