Fortis Healthcare shareholders seek better deal from bidders

Fortis Healthcare's minority shareholders are still discontent with the "unsolicited binding offer" Manipal Health Enterprises (MHE) announced on Tuesday. The shareholders want valuation to be bettered further or else may look at the offer that is in the working with IHH Healthcare Berhad.

A source told DNA Money that IHH Healthcare Berhad, South Asia's largest hospital operator, is still very much in the fray to bid for Gurugram-based healthcare company, but did not share the details.

IHH Healthcare Berhad is preparing to formally approach Fortis with an offer that will put it in competition with the TPG-backed Manipal Health Enterprises (MHE), people with knowledge of the matter said Bloomberg.

IHH Healthcare Berhad aims to send a letter to the board of Fortis Healthcare in the next couple of weeks about its plans to bid for the latter, the Bloomberg report said. The Kuala Lumpur-based company is contemplating a cash offer for Fortis, which has a market value of around $1.2 billion, said the person, asking not to be identified because the information is private.

"There are developments happening daily. Earlier IHH Healthcare Berhad was waiting for a report from law firm Luthra & Luthra on Fortis Healthcare's transaction and allegations of Singh brothers siphoning off money apart from treasury operations, etc." said a source.

"When the discussions were underway a couple of months ago, the valuation arrived at was around Rs 200 per share, which was lowered to around Rs 180 only to be revised further to Rs 160. Eventually, the public announcement stated that the valuation arrived at is around Rs 135 per share. Despite MHE sweetening the offer, the valuation is Rs 155 per share, which isn't great," said another source to DNA Money. Minority investors are looking at a valuation of around Rs 180 per share.

The revised offer values Fortis Healthcare at Rs 6,061 crore, which is Rs 1,058 crore more than the initial offer valued at Rs 5,003 crore.

Thus, MHE may make it's next move of approaching Fortis Healthcare's board by taking the opposition camp into confidence who wants a better value out of their investments made into the company.

According to Bloomberg, any offer would put IHH Healthcare Berhad in competition with the TPG-backed MHE, which on Tuesday unveiled a sweetened bid for Fortis's hospital operations after opposition from some investors.

In such an eventuality, it would not be cakewalk for Fortis and TPG-MHE to formalise the deal.

After Fortis Healthcare made public about going ahead with MHE, there were speculation that IHH Healthcare Berhad would make the next move through cash offer followed by a counter offer from TPG-MHE. However, what has happened is that MHE has made a revised offer and IHH Healthcare Berhad could come with a fresh offer later to make it competitive.

In response queries sent by DNA Money, IHH Healthcare Berhad replied, "We decline to comment. We will make appropriate announcement(s) should there be any material developments." An email sent to Fortis Healthcare did not elicit any response.

On Wednesday, ICRA Ltd downgraded the long-term rating for Rs 250 crore non-convertible debenture programme, Rs 105 crore fund-based limits, and Rs 195 crore term loans. The rating firm has revised it from BBB- to C. The short-term debt rating for Rs 600 crore and Rs 20 crore non-fund-based facilities has been revised from A3 to A4. "The ratings have been removed from watch with negative implications," read ICRA's rating report.

According to ICRA, "The rating action takes into account delay in servicing of a loan not rated by ICRA. The delay was on account of stretched liquidity position of the company along with its inability to roll over or refinance the loan. The ratings continue to be constrained by concerns pertaining to recoverability of the advances extended to related parties, potential impact of various ongoing investigations/litigations, deterioration in operational performance and large payments being made to Religare Health Trust."

Despite the rating downgrade, Fortis Healthcare's share price gained 0.85% to close to Rs 147.65 on BSE.

HIGHER DOSE

• Shareholders want valuation to be bettered further or else may look at the offer that is in the working with IHH Healthcare Berhad
   
• IHH Healthcare Berhad aims to send a letter to the board of Fortis Healthcare in the next couple of weeks about its plans to bid for the latter