Manipal TPG combine submits revised offer for Fortis Healthcare
A day ahead of the bidding deadline for control of Fortis Heathcare Ltd, the Manipal Hospital Enterprises Ltd-TPG Capital combine submitted a revised bid offering to infuse Rs750 crore upfront and a new deal structure that would help mitigate the indebtedness at the firm. The combine also offered a higher premium than they had done previously.
Manipal had earlier said that it was not willing to raise the valuation. The last minute submission of binding offers by other contenders has prompted it to raise the bid.
With this the Fortis board has received binding offers from Manipal, IHH Healthcare Bhd, KKR-backed Radiant Life Care and a combined bid from Sunil Munjal, Arvind Burman and Mohit Burman.
Manipal’s revised bid offers to address Fortis’s immediate liquidity crunch by way of upfront cash infusion of Rs750 crore, matching the offer made by Munjals and Burmans. The cash infusion will be subject to approval from Competition Commission of India as well as Fortis board and shareholders.
The deal also offers a premium of Rs1,319 crore for the hospital assets as against Rs1,058 crore proposed earlier, over and above the equity valuation of the business pegged at Rs5,003 crore.
The new structure tweaks the transaction pertaining to SRL Diagnostics, a unit of Fortis Healthcare. In its earlier offer submitted on 10 April, Manipal was to acquire 20% stake in SRL from private equity investors and subsequently conduct a rights issue to ensure greater shareholder participation post the acquisition.
A spokesperson for Manipal said: “No new onerous conditions that would be detrimental to Fortis shareholders were added to the agreement. On the contrary, following feedback from shareholders, we waived our exclusivity right, in turn allowing the Fortis board to engage potential bidders and giving them an opportunity to conduct due diligence.”
The new structure proposes purchase of stake not only from PE investors for Rs1,113.4 crore but also acquisition of Fortis shares in SRL not amounting to more than 5% of the SRL’s paid-up share capital. The proceeds from stake monetisation will be utilized for reducing indebtedness of the company.
The proceeds from sale of Fortis brand and sale of liquidation of Fortis stake in RHT Trust will also be utilised to cut debt. Manipal-TPG would also control 51% of voting rights in SRL. The new deal, however, offers veto powers to Fortis shareholders in “certain key matters” pertaining to SRL.
Moreover, to ensure certainty of the transaction if approved by the board, Manipal-TPG duo have submitted a letter of intent from ICICI Bank. The lender has agreed to refinance the credit facilities availed by Fortis to the extent of Rs1,836 crore and also finance it’s capital expenditure and working capital requirements to the extent of Rs500 crore. Manipal has also stated its intent to launch an open offer post the demerger of hospital assets of Fortis and will therafer undertake a rights issue amounting Rs4,000 crore.
Fortis on Wednesday evening said the one-time waiver offered by Manipal-TPG earlier pertaining to exclusivity provisions of the contract was not only onerous to abide by but also was a hurdle in the process of running a competitive bidding process. The one-time waiver allowed Fortis to permit limited due diligence to other interested bidders. According to the one-time waiver proposal, Manipal-TPG had the right to match any bid which is submitted with the Fortis board. It also stated that in case any other offer is considered suitable by board besides its own, both the proposals should be put up for shareholder voting.