IHH revises Fortis bid with binding proposal

Singapore

IN a move that marks IHH Healthcare's firepower and conviction to wrest control of India's second largest hospital chain, the Malaysian-controlled healthcare giant has set down a revised and more compelling offer to take over cash-strapped Fortis Healthcare.

On Tuesday, Asia's largest private healthcare operator IHH ditched what some industry watchers referred to as a half-hearted offer made about a week ago for a more weighty bid - one that is binding and not conditional on due diligence - for an immediate equity infusion of 650 crore rupees (S$130 million) via a preferential allotment of equity at 160 rupees per share.

The binding proposal is accompanied by a subsequent round of equity infusion - this one is non-binding and subject to due diligence - of up to 3,350 crore rupees at a price not exceeding 160 rupees apiece.

IHH's latest move in its fourth home market followed recent remarks by a Fortis director that a newly-formed three-member committee to advise the board on the choice of a final suitor would only consider binding bids. It also comes one day (April 25) before the committee makes its final pick after which the Fortis board is expected to deliberate on the recommendation on Thursday.

More significantly, the race for control of the troubled group battling severe debt and legal woes has heated up considerably since IHH's first approach, with four other interested parties so far entering the fray.

In a letter dated April 24 to Fortis disclosed in the stock exchange announcement, IHH said "... there has been keen interest in the company as evidenced by the proposals put forward by various interested parties over the last few weeks...and (we) have revised our proposal into a simple and clear construct," adding that it represented the most compelling proposition from the company.

With the immediate injection of primary equity, IHH is seeking the right to appoint two directors on the Fortis board.

The binding commitment for the equity infusion is subject to Fortis agreeing to provide IHH with immediate access to carry out a legal and financial due diligence to evaluate the subsequent infusion.

It is also subject to the end-use of the immediate equity infusion to be discussed with IHH's nominees on Fortis' board which will be applied primarily to pay off immediate dues to employees and creditors as well as to ease the debt servicing needs of India's second largest hospital chain, said IHH.

IHH said it plans to wrap up the due diligence within three weeks of being granted access to Fortis' "data room fully populated with all required information".

For its revised proposal to be swiftly implemented, IHH said it hoped to discuss and agree on the final terms in relation to the subsequent infusion contemporaneously with the immediate infusion during a four-week exclusivity period commencing from the start of the due diligence exercise.

IHH has given Fortis until May 4 to respond to its latest offer.

IHH said in the letter that "...with IHH's financing being entirely committed and ready, it is primed to execute this (revised proposal) expeditiously".

This is IHH's second attempt to get a slice of Fortis in just under a year. In the current round, IHH's first approach happened on April 11 with a "non-binding expression of interest" subject to due diligence at a price of up to 160 rupees per share. This was later, last Wednesday (April 18), followed up with an additional non-binding equity infusion of up to 4,000 crore rupees via a preferential allotment exercise, also subject to due diligence.

The other parties vying for a big piece of Fortis include TPG backed-Manipal Hospital, Munjal and Burman families, China's Fosun International and KKR-backed Radiant Life Care.

Up until IHH's latest salvo for the fight over Fortis, only the bids from Manipal and India's prominent families were binding.

"They (IHH) are now back in the race," said a market watcher.