Malaysia’s IHH plans to outbid Manipal Hospitals for Fortis: report

Asia’s largest hospital operator sent a letter to the Fortis board Wednesday saying it may be willing to pay Rs160 per share to acquire control of the Indian company, the sources said. It has asked the Fortis board for some time to update its due diligence before making a formal bid, they said.

The rival bid by IHH would follow Manipal’s offer earlier this week to buy Fortis at around Rs155 per share, or Rs8,039 crore ($1.23 billion), about which minority shareholders, including billionaire Indian investor Rakesh Jhunjhunwala, had expressed concerns.

The Kuala Lumpur-based company’s bid comes just a day after TPG-backed Manipal Health Enterprises Pvt sweetened its offer to hive off Fortis’s hospital operations and merge them with its own business. Manipal’s revised plan gives Fortis shareholders a higher value than the Rs140 offered earlier.

The IHH bid could value the healthcare services giant at as much as $1.3 billion, according to Bloomberg.

Fortis shares spiked following the report, although it wasn’t immediately clear if the new bid would appease minority shareholders.

The deal is critical for Manipal to expand its presence in the growing hospitals business beyond south India. Increasing access to healthcare services and a government drive to expand health insurance are expected to increase footfalls at hospitals, benefiting chains such as Manipal and Fortis.

IHH has been scouting for acquisitions to grow in India, where it has said before that it expects a spike in demand for private healthcare.

Fortis chief executive Bhavdeep Singh said on a call last month that other parties, which he declined to name, had expressed an interest in buying Fortis, Reuters reports. IHH declined to comment on Thursday and Fortis did not respond to a request for comment.

Fortis shares jumped as much as 4 per cent on Thursday to reach Rs153.9 – their highest level since 27 March, when Manipal made its first offer public.

The potentially competing bids are the latest twist in the Fortis saga, with India’s fraud watchdog and stock regulator investigating the company after Bloomberg News reported the company’s founders took at least Rs500 crore out of the firm without board approval. Brothers Malvinder Singh and Shivinder Singh have resigned from the company and have lost control of their shareholding due to mounting debt.

Manipal’s controlling shareholder Ranjan Pai said in an interview with Bloomberg onWednesday the reason he was not buying Fortis outright was because of the potential liabilities posed by the investigations.

IHH is planning a cash offer for Fortis shares, Bloomberg’s sources said Wednesday. If the approach is rejected by the Fortis board, IHH will consider taking its offer directly to the Indian company’s shareholders, according to them.