Malaysia’s IHH Healthcare has come out with a binding offer to invest Rs 650 cr in Fortis Healthcare, and follow it up with Rs 3,350 cr after conducting three weeks of due diligence on the company’s account books.
The move competes with offers such as the Rs 1,500 cr offer from the combined team of the Munjals of Hero Motocorp and Burmans of Dabur, as well as a merger proposal from Manipal TPG group that values Fortis Healthcare at Rs 5,000 cr. The Munjals and Burmans have offered to invest Rs 750 cr prior to the due diligence.
The offer from the Malaysian healthcare chain is arguably the biggest that Fortis has got, in terms of the sheer size of the proposal.
While the Munjal-Burman proposal promised to pay Rs 161.60 for each share allotted to them under the Rs 1,500-cr proposal, IHH Healthcare is offering to pay Rs 160 for each share under its Rs 4,000 cr proposal.
The foreign firm said the higher amount is required for fully take care of the liquidity needs of the hospital chain.
THE DEAL
The company said Fortis needs Rs 4,000 cr to meet “immediate liquidity requirements for working capital and other near-term funding requirements.” This will also enable Fortis to buyout the asset portfolio of RHT Health Trust, as well as fulfill long-due infrastructure upgrades, it added.
“We believe that providing certainty on a holistic solution for the Company’s short, medium and long-term financial needs is in the best interests of the shareholders of the Company.”
The initial Rs 650 cr will be via preferential issue and allotment of equity shares at a price of Rs 160 each, in return for which IHH would be given the right to appoint two directors on the company’s board.
“This binding commitment for the Immediate Equity Infusion is subject to: (i) confirmation by the Company that IHH will be given immediate access to carry out a legal and financial due diligence..for the purposes of evaluating the Subsequent Equity Infusion; (ii) the receipt of applicable approval from the company’s shareholders and any relevant regulatory approvals in a manner to be discussed between us and the company, and
(iii) end-use of the Immediate Equity Infusion to be discussed with our nominees on the board, but to be applied primarily towards payment of immediate dues to employees, creditors as well as easing the debt servicing needs of the company.”
The subsequent equity infusion will also be at Rs 160 per share.
The company said it is seeking to complete its due diligence process within three weeks from the “first day we are granted access to the
data room fully populated with all information..”
“As part of the Due Diligence, we would expect that we and our advisors would have access to your auditors, Deloitte as well as Luthra and Luthra, in connection with the ongoing investigations into the company,” it added.
“Our request for due diligence prior to the Subsequent Equity Infusion stems from the inability of the statutory auditors of the company to opine on its financial position as at 31 December 2017 and the regulatory investigations that are currently underway; and (d) in order for the Revised IHH Proposal to be swiftly implemented, we will seek to discuss and agree on the terms of the definitive documents in relation to the Subsequent Equity Infusion contemporaneously with the Immediate Equity Infusion during an exclusivity period of four weeks commencing from the start of the Due Diligence exercise,” it added.
With IHH giving a binding proposal, the company’s evaluation committee is likely to now take up the proposal along with the other two.