Following months of intense negotiations, private healthcare provider Fortis Healthcare has accepted a $582 million offer for a 31.1% stake from Malaysia’s IHH Healthcare, triggering a mandatory cash open offer for a further 26% equity interest in the beleaguered Indian healthcare giant.
Once a darling of investors both domestically and internationally, Fortis Healthcare has finally put six months of negotiations to bed after accepting a takeover bid from IHH Healthcare that values the company at $1.29 billion.
Fortis has been attracting attention for all the wrong reasons since its intoxicating days ten years ago.
Founded in 1996 by wealthy industrialist Parvinder Singh, his sons Malvinda and Shivinder Singh took over the company and created Fortis Healthcare in 2001.
The company grew through a series of acquisitions throughout the 2000s, spreading to 11 countries by 2008, when the company was buoyed by the $4.6 billion sale of its pharmaceuticals business Ranbaxy Laboratories to Japan’s Daiichi Sankyo Co.
However, claims of financial irregularities, litigation and mismanagement forced the Singh Brothers from the company in February this year, allowing the sale process to begin in earnest.
And IHH seems to be fully aware of the of the problems facing them in the short term.
“We have developed a 100-day turnaround plan to stabilise Fortis Healthcare which will pave the way for Fortis Healthcare to realise its full potential in the long run,” said Tan See Leng, chief executive officer of IHH, in a July 13 statement.
For sure, IHH is not a newcomer to the Indian healthcare sector, having entered the market in 2002 through its subsidiary Parkway Pantai.
Turning around Fortis Healthcare may prove to take much longer than 100 days.
However, the potential for the healthcare market in India is enormous with a growing population backed by an increase in disposable income, one reason why the battle for control was so fierce.
The deal announcement ends a bidding war that included TPG Capital backed Manipal Health Enterprises and KKR backed Radiant Life, IHH will become the second largest healthcare services provider in hospital numbers in India after Apollo hospitals.
IHH’s offer of Rs170 per share offered a 19.5% premium to Fortis’ closing price on July 12, outbidding the TPG-Manipal consortium’s Rs160 per share offer, the other binding proposal submitted to the Fortis Healthcare Board on July 3.
After the deal is finalised in the fourth quarter this year, IHH will operate 83 hospitals and healthcare centres across India, boosting revenues from $2.8 billion to $3.46 billion.
“The IHH proposal offers a more strategically and financially compelling proposition along with certainty and simplicity,” said Ravi Rajagopal, chairman of the board of directors of Fortis Healthcare.
Only time will tell if IHH’s expertise will provide the shot in the arm that Fortis Healthcare has been needing for the past 18 months.
Citigroup, Deutsche Bank, HDFC Bank and HSBC actied as financial advisors and joint managers to the open offers for IHH, while Allen & Gledhill, Khaitan & Co and Foong & Partners acted as legal advisors.
Standard Chartered and Arpwood Capital acted as financial advisors for Fortis Helathcare, and Luthra & Luthra Law Offices and Cyril Amarchand Mangaldas acted as legal advisors.
This story has been updated to correct the year in which IHH entered the Indian market.