Singapore

SHARES of RHT Health Trust jumped more than 10 per cent on Wednesday after the Singapore-listed trust said it's in talks to sell the group's entire portfolio of healthcare assets for close to S$1 billion.

In an early morning announcement, RHT's trustee-manager said it had entered into exclusive talks with India-listed controlling shareholder Fortis Healthcare to buy the India-based assets for 46.5 billion Indian rupees (S$964 million).

The manager added that should a deal firm up, it intends to distribute "substantially" the net proceeds to unit holders. It was however, silent on whether the trust will be delisted.

When the market opened, investors greeted the news positively to chase the shares up 10.5 per cent to S$0.895. Nomura estimated that the sale price translates to a unit cost of about S$0.90 to S$0.91 per share.

On its website, RHT listed an India portfolio of 12 clinical establishments, four greenfield clinical establishments and two operating hospitals which it said were together worth about S$991 million as at 31 March 2015.

Analysts generally agreed that the offer price was fair. It represents an 11 per cent premium over the business trust's closing share price on Nov 14, and a 7.8 per cent premium over the latest reported net asset value of S$0.835 per share.

Under the term sheet with Fortis, the two parties have a 60-day period for exclusive negotiation. Fortis has indicated that the proposed acquisition will take about six to nine months to complete.

RHT's trustee-manager has appointed Merrill Lynch (Singapore) to advise on the proposed disposal.

Fortis, a large integrated healthcare delivery service provider in India, currently holds an indirect interest of about 29.76 per cent of units in RHT.

In a briefing for analysts, the manager of the trust said it believes that the deal is compelling because the trust has yielded 65 per cent in total shareholder return, including five years of dividends, since it listed in 2012.

The manager said the proposed acquisition also addresses investors' concern over the future growth potential of RHT Health Trust's portfolio. Given the stock's low liquidity, it also presents a good exit opportunity for investors.

From Fortis' standpoint, the group believes that the proposed transaction will make it easier for investors to understand its business and financial performance.

In an interview with The Business Times in June this year, RHT Health Trust CEO Gurpreet Singh Dhillon declined to discuss speculation since March that Fortis was keen to buy out the trust.

But he said: "There's always been interest in India hospitals. They are one of the most active destinations for foreign direct investment for the last two, three years. However, all transactions are taking place in the operating businesses; we focus purely on the infrastructure part."

He added that investment in assets tends to yield more stable income, which is a different appeal from the high potential equity growth from investing in the healthcare operating business.

Fortis plans a combination of equity, quasi-equity and/or debt to finance the deal. It said it has an enabling resolution in place to raise capital of up to 50 billion rupees and has been in active dialogue with financial and strategic investors to raise funds. It is supported by Standard Chartered Bank as its financial advisor.

The trust early on Wednesday announced a 15.5 per cent drop in its distribution per unit to 1.14 Singapore cents for the three months ended Sept 30, due to higher costs from refinancing related activities and increased interest costs.

Total revenue rose 4.9 per cent to S$23.9 million, contributed by the contractual annual increase in base fee payable by its operator Fortis Healthcare, while net service fee and hospital income rose 6.4 per cent to S$13.4 million.

Fortis ended the day at 140.9 rupees on the National Stock Exchange of India, up 8 per cent as more than 19 million shares changed hands.