Manipal-TGP steps in again with sweetened offer for Fortis Healthcare

Fortis shares rose as much as 4.2 per cent to Rs155 this morning, marking their biggest intraday percentage gain in nearly two weeks.

Fortis late on Thursday said it planned to accept an offer from Hero Enterprise Investment Office (controlled by the Munjals) and the Burman Family Office that would invest Rs1,800  crore (266.5 million), valuing Fortis at Rs9,000 crore, subject to shareholder approval.

The move had reportedly dismayed many shareholders and sent shares in the cash-strapped hospital operator down almost 5 per cent.

Manipal-TPG, which was the first to make a binding offer, has also asked the board of Fortis Healthcare to reconsider its decision of recommending the Munjal-Burman deal to the shareholders of the company.

In a regulatory filing, Fortis said it has received revised offer from Manipal and TPG with a proposal to invest in the company, while making public a letter sent by Manipal Health Enterprises Pvt Ltd (MHEPL) to the Fortis board.

"For purposes of the merger, a value of Rs9,403 crore shall be attributed to FHL and a value of Rs6,070 crore shall be attributed to MHEPL as had been originally determined by the independent valuers of for the purpose of the transaction," MHEPL said in its letter presenting the revised offer.

It further said, "The preferential allotment shall be undertaken at a price of Rs180 per share."

MHEPL claimed that its modified new offer "is significantly better than any other offer / bid FHL has received to date, including the Hero-Burman offer", which it said did not address a host of issues plaguing the healthcare major.

"...unlike our offer, the Hero and Burman offer only partially solves the short-term liquidity concerns of FHL and fails to deliver any long-term benefits to FHL or solve the larger issues facing FHL," Manipal said.

The issues include FHL's payment obligations for the acquisition of the relevant Indian entities from RHT and the exit required to be provided by FHL to the private equity investors in SRL, it added.

Stating that Manipal-TPG have been following the developments of the past few days after the announcement by FHL and as reported in media, there has been negative reaction of FHL shareholders to the decision of the FHL board to accept the Hero and Burman offer, the letter said.

"In light of this procuring the approval of 75 per cent of FHL shareholders for the Hero-Burman offer is likely to be very challenging for the FHL board," Manipal said, adding its modified new offer is binding in its entirety and is valid till 29 May.

Comments from the Munjal-Burmans combine could not be immediately obtained.

Asking the board of FHL refer their "modified offer" to the company's shareholders, MHEPL said, "We request the Fortis board to reconsider its decision to refer the Hero and Burman offer to the shareholders."

On 6 May, Manipal Health Enterprises had revised yet again its offer for Fortis Healthcare Ltd (FHL), raising the value to Rs8,358 crore. It offered subscribe preferential allotment for Rs2,100 crore translating its proposed investment at Rs160 per equity share (See: After IHH and Hero-Burman, Manipal-TGP too sweetens offer for Fortis).

The consortium had initially valued the hospital business of the healthcare chain at Rs5,003 crore in its offer on 27 March.

Five suitors were in the race for Fortis but after the company's board decided to evaluate only binding offers, Malaysia's IHH Healthcare Berhad, Munjal-Burmans, Manipal-TPG and KKR-backed Radiant Life Care put in their bids.

The fifth bidder, Fosun Health Holdings, an arm of Fosun International, which made a non-binding proposal to invest a total of $350 million (over Rs2,295 crore) at a price up to Rs156 per share, had not revised its offer.

The Munjals and Burmans were chosen by the Fortis board on 10 May for their revised offer which proposed to increase their investment to Rs1,800 crore, without any due diligence, from a previously revised offer of Rs1,500 crore.

The keen interest in Fortis emerges as Indian Prime Minister Narendra Modi looks to implement a healthcare programme aimed at providing insurance cover to hundreds of millions of people in a country with a dearth of adequate medical clinics. The scheme is expected to make private hospitals, such as those run by Manipal and Fortis, accessible to millions of poor families.

The new offer is significantly better than any other offer or bid that Fortis has received to date, including the one by Hero and Burman, Manipal said in its statement, urging Fortis' board of directors to refer the offer to its shareholders.