After row, TPG offers Rs 1,000 cr more for Fortis Healthcare

TPG Capital-backed Manipal Hospital Enterprises (MHE) has sweetened the deal to buy out Fortis Healthcare’s hospital business. The latest offer has “an upward revision of Rs 1,058 crore to the shareholders of Fortis Healthcare over and above the hospital business of Fortis Healthcare’s equity valuation of Rs 5,003 crore,” said a regulatory filing.

This move comes after speculation of IHH Healthcare Berhad will come up with an open offer to beat MHE’s deal value. The second factor to better the deal was minority investors being upset with undervaluation of Fortis Healthcare. DNA Money had reported that the value of Fortis Healthcare comes to around Rs 135 per share as against close to Rs 200 initially pegged at a few months ago. The latest proposal values Fortis Healthcare’s each scrip at Rs 155.

Fortis Healthcare had even received complaints from investors on deal’s undervaluation leading to revision in the proposal.

As per the revised proposal, MHE shall not purchase any equity in SRL Diagnostics from Fortis Healthcare and it will continue to remain Fortis Healthcare’s subsidy. However, MHE chairman Ranjan Pai will purchase 30.93% shares from private equity investors for Rs 1,113.4 crore. The initial plan was to buy the stake from private equity ventures as well as an additional 20% from Fortis Healthcare.

Secondly, the reworked proposal offers 13.1 shares in MHE against every 100 shares of Fortis Healthcare, thereby leading to valuation of Rs 155 per share. The earlier offer was 10.83 shares per 100 shares of Fortis Healthcare.

As per a regulatory filing by Fortis Healthcare, the revised proposal “would result in an equity value of Rs 6,061 crore being attributed to the hospital business of Fortis Healthcare and therefore, this would result in a more favourable share exchange ratio for the shareholders.”

By Ateeq Shaikh, DNA Money