IHH Healthcare acquires 31.1% controlling stake in Fortis Healthcare Limited
Acquisition of 31.1% in Fortis through a INR 40 billion (RM 2,348 million / USD 582 million) subscription to a preferential allotment (“Preferential Allotment”) of Fortis shares , at a price of INR 170 per share, valuing Fortis at approximately RM 5,214 million / USD 1,292 million1
- Preferential Allotment will trigger a mandatory cash open offer (“Fortis Open Offer”) for 26% equity interest in Fortis at an offer price of INR 170 per share
- Fortis Acquisition, on completion, will subsequently trigger mandatory cash open offer for 26% equity interest in Fortis Malar Hospital (“Malar Open Offer”) at an offer price of INR 58 per share, valuing Fortis Malar at approximately RM 64 million / USD 16 million
- Transformational transaction gives IHH a controlling interest in leading healthcare services provider in India, one of the fastest growing markets driven by sustainable megatrends
- Fortis Open Offer expected to open in August / September 2018, subject to completion of Indian regulatory reviews KUALA LUMPUR/SINGAPORE, 13th July 2018 – IHH Healthcare Berhad (“IHH”), through its wholly owned subsidiary Northern TK Venture Pte. Ltd. (“Northern TK”), was today announced as the preferred bidder to acquire a controlling stake in Fortis Healthcare Limited (“Fortis Healthcare”), a leading healthcare service provider in India, through a combination of primary equity infusion and secondary purchase from public shareholders of Fortis Healthcare at an offer price of INR 170 per share (“Fortis Acquisition”). Upon completion of the Fortis Acquisition, IHH will hold a minimum of 31.1% and a maximum of 57.1% equity interest in Fortis Healthcare and will trigger a mandatory tender offer to acquire 26% equity interest in Fortis Healthcare’s listed subsidiary, Fortis Malar Hospital Limited (“Fortis Malar”), under the applicable provisions of Indian takeover code. As part of the Fortis Acquisition, IHH, Rough Northern TK, has entered into a share subscription agreement with Fortis Healthcare for INR 40 billion (RM 2,348 million / USD 582 million) subscription to a preferential allotment of equity shares, at a price of INR 170 per share. The preferential allotment will make IHH the largest shareholder in Fortis Healthcare with 31.1% stake and would trigger the requirement to make a mandatory open offer to the public shareholders of Fortis Healthcare for 26% of the outstanding shares, under the applicable provisions of Indian takeover code. Based on the Offer Price of INR 170 per share, the implied equity valuation for 100% of Fortis Healthcare is INR 88.8 billion (RM 5.2 billion). The Offer Price represents a 22.3x multiple of Fortis Healthcare’s
- Implied valuation for 100% equity interest in Fortis Healthcare Exchange rates of 1 RM = 17.0349 INR and 1 USD = 4.0370 MYR
EBITDA2 for the last twelve months ended 31 March 2018 and 19.5% and 15.3% Premium to the closing share price on 12 July 2018 and sixty-day volume weighted average price (“VWAP”), respectively. The Malar Open Offer is at INR 58 per share, representing an implied equity valuation for 100% of Fortis Malar of INR 1,092 million (RM 64 million). The Malar Open Offer price represents a 13.0% and 0.8% Premium to the closing share price on 12 July 2018 and sixty-day VWAP, respectively. Depending on the acceptance levels for the Fortis Open Offer and Malar Open Offer, the total funding required for the transaction will be between INR 40 billion (RM 2,348 million) and INR 74 billion (RM 4,331 million), which will be funded through existing cash reserves and debt facilities.
Key highlights for IHH
- Significant expansion of IHH’s exposure to India, its fourth home market and one of the most attractive countries globally for healthcare, through a controlling interest in the second largest hospital chain in the country
- Fortis Healthcare’s hospitals have a stronger presence in North India, complementary to IHH’s existing South India-focused portfolio and provides access to a leading platform with pan-India presence
- Offers IHH and Fortis Healthcare significant synergy potential in management, administration and operations, leveraging IHH’s global private healthcare execution track record and expertise Key highlights for Fortis Healthcare and Fortis Malar
- Significant equity infusion in Fortis Healthcare to address the immediate funding requirement for operations and strategic transactions
- Attractive option for the public shareholders to monetise their shareholdings at a premium
- Cash offer provides certainty in the context of high historical price volatility
- Simple and binding offer structure with limited conditions and a short timeline to completion
- Secures a clear path forward for Fortis Healthcare, with the backing of a leading global healthcare group as the majority shareholder to provide a stable financial and operational platform to continue to grow
Fortis Healthcare is a leading integrated healthcare services provider in India with operations spanning across both hospitals and diagnostics businesses. Currently, it is the second largest player in India by number of hospitals, operating a network of 34 hospitals across the country and internationally with a capacity of over 4,600 beds and employs more than 2,600 doctors and 13,200 support staff who catered to c. 2.6mn patients in FY20183.
2. Reported EBITDA (includes other income)
3. Fortis Healthcare operating metrics as per Fortis Healthcare presentation (March 2018). Number of patients for 9M FY2018 annualized for FY2018
Fortis Malar, a subsidiary of Fortis Healthcare, is one of the distinguished multi super-specialty corporate hospitals in Chennai providing comprehensive medical care across multiple segments. Established in 1992, Fortis Malar has become a household name for tertiary care hospital services in Chennai over the years.
Source: Business Wire India