Fortis merger: Will Manipal-TPG proposal seal the deal?

In the revised proposal, Manipal has made clear margins over IHH and Munjal-Burmans, signalling a merger that can be a game-changer in the healthcare sector.

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The country’s second-largest hospital chain operator, Fortis Healthcare has got revised offer after Manipal-TPG combined sent fresh proposal by committing to invest at RS 180 per share, an increase from the Rs 160 it last offered. This increases the valuation to Rs 9,403 crore, according to reports.

Fortis Healthcare on Monday said they have got another revised letter from Manipal Healthcare to invest in the company, the letter was addressed to the Fortis board headquartered in Delhi. Spokesperson from Fortis Healthcare confirmed to IDG by saying, “We got the proposal yesterday and it has been sent to the board to decide. As soon as major developments happen we will release an official statement.”

KEY HIGHLIGHTS

  • Fresh proposal by Manipal commits to invest at Rs. 180 per share,  at a total valuation of Rs. 9,403 crore.
  • Fortis board recommended the Munjal-Burmans bid of Rs 172 per share, at a total valuation of Rs 1,800 crore for shareholder approval.
  • Malaysia based IHH Healthcare had shown interest to invest Rs 4,000 crore at valuation of Rs 175 per share.
  • If accepted, it will be the expansion of Manipal Healthcare to North India, now significant only in South India.

Last week the Fortis board had recommended the Munjal-Burmans bid of Rs 172 per share, at the total valuation of Rs 1,800 crore for shareholder approval. However, the offers by Hero (Munjal) and Burman was declined after shareholders expressed their unhappiness at the valuation stating it very low.

IHH Healthcare of Malaysia also offered to invest Rs 4,000 crore at valuation of Rs 175 per share, which was earlier leading the race. However, now it looks like, Manipal may win this bid.

Talking about the positive side of it, Dinesh Madhavan, Director, Healthcare Services, HCG Healthcare said, “If you look at the Fortis Healthcare presence across the regions they are in, they are supposed to be providing access and care to people, who are probably suffering from various types of diseases. And if they have currently challenges with their financial situation, then they would not be in a position to do optimally what they could have done if they were not in the current situation. It is good for the patients and public at large, that a group which has been rendering care and looking at the overall healthcare accessibility be provided and focusing on doing the right way.”

Talking about the expansion of Manipal he said Manipal has got a presence only in south of India. By expanding across the sub-continent, it helps Manipal as a group to actually expand network and have a larger footprint.

TOP SHAREHOLDERS

  • Yes Bank has 12 percent of stakes
  • East Bridge Capital along with Jupiter India Fund have around 12 percent stake.
  • Axis Bank, Morgan Stanley, ICICI Prudential, BlackRock, York Capital and Elliott Management are some of the other large institutional investors.

“Manipal has also been consistently setting up benchmark and delivering care in Karnataka be it in education or be it in healthcare. And if they are able to translate that across geographies that Fortis is present today, it means a lot for the entity called Manipal and for the institution which is trying to make a difference in healthcare sector across India.” Madhavan added. 

CONTROVERSY

Fortis' decision sparked controversy as two large institutional shareholders have expressed their unhappiness at the valuation. Rival bidders, calling foul play, said they will directly reach out to shareholders with counter bids.

“We have been following developments over the past few days after the announcement by Fortis and have observed, through media reports, the negative reaction of the shareholders to the decision of the Fortis board to accept the Hero (Munjal) and Burman offer,” Manipal-TPG said in the offer statement.

... Manipal has got a presence only in South India. Expanding across the sub-continent helps Manipal as a group to actually expand network and have a larger footprint.
Dinesh Madhavan
Director Healthcare Services, HCG Healthcare

However, the offers by Hero (Munjal) and Burman was declined after shareholders expressed their unhappiness at the valuation stating it very low. Manipal-TPG also in joint a statement said that the offer made by Hero (Munjal) and Burman will fail to deliver any long-term benefits to Fortis or solve any issues it is currently facing.