It's raining revised offers for Fortis Healthcare Limited (FHL). Yesterday, it received fresh proposals from three suitors - Manipal Health Enterprises Private Limited (MHEPL), Radiant Life Care Private Limited and IHH Healthcare Berhad. A day earlier, the Munjal-Burman combine wrote to the FHL board of directors that they are willing to extend the validity period of their "improved offer" made on April 18 till May 4.
All this follows Fortis Healthcare's announcement last week that the board had decided to evaluate only the binding offers and had set up an advisory committee for the same. The expert committee, chaired by Deepak Kapoor, former Chairman and CEO of PwC India, is scheduled to submit its recommendations tomorrow, in time for the FHL board meeting.
So what's on offer for Fortis? To begin with, Malaysian hospital chain IHH claimed that its revised proposal is based on its assessment that FHL needed Rs 4,000 crore to meet immediate liquidity requirements and to fund the buyout of Religare Health Trust (RHT) assets. With that in mind, IHH proposed a binding offer for an immediate infusion of Rs 650 crore - without any due diligence - valuing Fortis at Rs 160 per share. This amount was to be applied primarily to pay employees, creditors and ease FHL's debt servicing needs. In exchange, IHH wanted the right to appoint two directors on the FHL board. "We expect the independent directors of the company to constitute a majority of the board after the appointment of our nominees," said the offer letter.
It also stated that the offer was subject to confirmation that it will be given "immediate access to carry out a legal and financial due diligence". IHH also made a non-binding proposal to infuse up to Rs 3,350 crore subsequently, subject to satisfactory completion of the due diligence exercise in a three-week time frame.
The Malaysian hospital chain further stated that the revised proposal had to be accepted in its entirety and set a deadline of 5 pm on May 4 before the revised offer would be withdrawn. This, incidentally, is the third offer that it has made to FHL in 10 days.
Meanwhile, the offer letter from KKR-backed Radiant Life Care proposed a binding offer to purchase the Fortis hospital in Mulund, Mumbai, "without due diligence and as a going concern at an enterprise valuation of Rs 1,200 crore as the first step".
This followed the company acknowledgment that "due to liquidity constraints, FHL has been unable to run a formal auction process" and was only considering binding offers. The second part of Radiant's offer - non-binding at this stage and subject to due diligence - proposed spinning off SRL Diagnostics "for the time being so that FHL can run an independent competitive sale process".
Radiant further proposed a demerger of the hospitals business from FHL into a new company followed by an all-cash open offer to shareholders of the new entity at a price of Rs. 126 per share. The offer is subject to Radiant being able to acquire 26 per cent or more shares of the new company. "In order to fund RHT stake acquisition, we propose a rights issue offer by NewCo [new entity]. The entire rights offer amount would be back-stopped by Radiant," the offer letter added.
That brings us to the last revised offer on the table for FHL as of April 24. MHEPL, revising its offer for a second time in two weeks, has now proposed to offer a premium of Rs 1,319 crore to FHL shareholders, over and above the equity valuation for FHL's hospital business of Rs 5,003 crore. This is a hike of 25 per cent over its previous revised offer dated April 10. Under the fresh offer, an equity value of Rs 6,322 crore will be attributed to the hospital business, up from Rs 6,061 previously.
According to The Hindu, the Manipal-TPG combine has now also offered to buy up to 5% of the paid-up capital of SRL from Fortis at the same price as it will buy from private equity investors of SRL. It will buy the stake from private equity investors of SRL for Rs 11,134 crore, added the offer letter. In return, it has sought control over at least 51 per cent of voting rights in SRL along with Fortis and also majority representation on SRL's board. It has also sought limited veto rights pertaining to certain matters of SRL.
Moreover, MHEPL offered to "arrange financial assistance of up to Rs 750 crore" either by way of debt financing of by way of guarantees or comfort letters to lenders of FHL to take care of immediate liquidity. But this is subject to applicable laws and FHL approving the new proposal.
MHEPL also said that it did not have any objection to the merger of Fortis and SRL subsequently provided all pending investigations into Fortis and other entities were completed without any adverse implications, including any reputational damage.
The FHL board is expected to make a decision on the winning bidder at the board meeting tomorrow.