Indian tycoons offer to invest RM745m in Fortis Healthcare

by BLOOMBERG

MUMBAI • Fortis Healthcare Ltd said it has received a joint investment proposal from two Indian business families, intensifying a race to gain control of the country’s second-largest private hospital chain.

Hero Enterprise Investment Office and the Burman Family Office have made a binding offer to invest a total of 12.5 billion rupees (RM745.12 million) through a preferential share allotment at at least 156 rupees a share, according to a Fortis exchange filing last Thursday. The proposal, which is subject to certain conditions, includes an immediate investment of five billion rupees and 7.5 billion rupees after diligence is completed within three weeks.

The race for Fortis is heating up as a TPG-backed Indian firm sweetened its initial offer that values the company at 155 rupees a share, and IHH Healthcare Bhd proposed a bid of up to 160 rupees apiece. The competing proposals are the latest twist in the Fortis saga, with India’s fraud watchdog and stock regulator probing the company after Bloomberg News reported that its founders took at least five billion rupees out of the company without board approval.

Fortis shares fell 1.2% to 152.05 rupees in Mumbai last Friday.

Competing Offers

“As the assets of Fortis are good, the company may get more competitive offers in the future,” said Sanjiv Bhasin, executive VP for markets at brokerage India Infoline Ltd. “It has potential to move up to 175 rupees a share.”

IHH has expressed interest in Fortis, the Indian company said in a filing last Friday after the close of trading. Bloomberg News last Thursday reported that IHH has proposed a potential bid of as much as US$1.3 billion (RM5.05 billion) for Fortis. The proposal is subject to satisfactory completion of diligence, IHH said in its letter dated April 11 to Fortis attached to the filing.

“IHH brings an impeccable reputation, high corporate governance standards, deep financial resources and strong operational expertise hone through successfully running hospitals globally coupled with a proven track record in India,” the South-East Asian operator of hospitals said. “And will be the best suited partner for the company to tide through the current crisis.”

‘Simple Offer’

The Hero and Burman group entities are shareholders of Fortis, with about a 3% stake in the hospital operator, according to the offer letter from the investors attached to the filing last Thursday. The two entities said they are concerned about Fortis’s future and the company requires funding for its immediate needs as well as to develop its long-term value.

“Our offer is simple and does not envisage any changes to the current structure, operations and assets of the company,” Sunil Kant Munjal (picture) of Hero Enterprise, and Mohit Burman of the Burman Family, wrote in the letter. Their proposal “can be implemented in a fairly short period of time and will allow the company to focus on stabilising operations and on growth”, they said.

Munjal is the chairman of Hero Enterprise and is president of Dayanand Medical College and Hospital in Ludhiana, in the northern Punjab state, which has more than 1,500 beds, according to the letter. The Burman family founded Dabur India Ltd, which sells consumer products from hair oil to packaged juices.

The two Indian groups had approached Fortis in March to discuss the possibility of a deal, though the talks were unsuccessful as the company’s management had said they didn’t have the time to offer an opportunity for due diligence, according to the letter.

They are entering the fray as founders Malvinder Singh and Shivinder Singh were unable to repay loans and lost Fortis shares put up as collateral. Their stake in Fortis declined to less than 1% from 34.4% previously.