The Malaysian healthcare company, IHH Healthcare Berhad is set to purchase one of India’s private healthcare units, Fortis Healthcare with a bid of USD 1.1 billion. The IHH will receive control of 30 hospitals amidst a boom in private healthcare in India.
IHH will hold 31 percent stake in Fortis Healthcare after the stakeholders approve of the bid. The bidding war continued for a month after which Fortis accepted 40 billion rupees from IHH issuing shares at Rs. 170 per share.
The IHH will further bid for another 26 percent of shares at the same price. They have offered up to Rs. 33 billion.
Before Fortis accept this offer, it had received a joint bid of Rs. 150 billion from Indian firm Manipal Health Enterprise Ltd., and U.S., private equity firm TPG Capital at Rs. 160 per share. It initially accepted the offer but later declined.
It also received offers from four other investors following the Manipal-TPG bid. A partnership of two Indian business families had laid out an offer of Rs. 18 billion. However, due to the discontent among various stakeholders, Fortis was forced to reopen the bidding process.
The growing private healthcare expenditure in India along with the Government’s efforts to expand the health insurance in a country with inadequate public healthcare facility, firms like Fortis are attractive investments. The upcoming insurance schemes will also bring profits to these private hospitals.
Since the acceptance of the bid, Fortis shares have gone up by 2.5 percent at Rs. 145.80 below the offer price on Friday. However, due to its prolonged cash flow problems, rising debt and image problems, Fortis shares have suffered an overall decline of 11 per cent this year.
Fortis will use the IHH offer to refinance its Rs. 25 billion debt and also solve its short term liquidity needs.
