TPG-backed Manipal revises offer for Fortis Hospitals, SRL

Manipal Hospital Enterprises Pvt. Ltd, backed by private equity firm TPG Capital, has raised its takeover offer for the hospital business of Fortis Healthcare Ltd after shareholder concerns that the previous proposal undervalued the target company.

The revised offer values Fortis’ hospital business at Rs 6,061 crore (Rs 116 per share), up almost 21% from the previous offer, Ranjan Pai-led Manipal said in a statement late Tuesday evening. Manipal Hospital’s equity valuation remains as before at Rs 6,070 crore, it added.

The new offer values Mumbai-listed Fortis at Rs 155 a share. That's 5.9% higher than the Rs 146.40 price at which Fortis shares closed on Tuesday. Fortis shares have risen almost 26% since the close of 28 March, the day after Manipal made its first proposal.

Manipal, majority owned by Ranjan Pai, also said that existing shareholders of Fortis will hold a stake of almost 50% in the combined company as per the revised offer.

The revised proposal also entails a change in the offer for Fortis Healthcare's diagnostics unit SRL. Manipal Hospitals parent Manipal Education and Medical Group will purchase a 30.9% stake of SRL from private equity investors, and will take on board and management control of the business. Fortis will continue to hold a 56.6% stake in SRL.

The original proposal involved Manipal agreeing to buy a 50.9% stake in SRL. This included 20% from Fortis and 30.9% from PE investors. Fortis was to hold 36.6% of SRL as per the first offer.

A rights issue of Rs 4,000 crore will also be initiated following the demerger to support the proposed acquisition of hospital assets owned by RHT Health Trust, Manipal said. This will provide an opportunity to Fortis shareholders to participate on an equal basis with MEMG and TPG to fund the capital needs of the combined hospital business.

“We continue to believe in the compelling prospects from the combination of the hospital business of Manipal and Fortis,” said Pai, chairman at MEMG. “We hope that our revised offer addresses the concerns certain Fortis shareholders had raised and believe this offer is in the interests of all stakeholders, including Fortis’ shareholders.”

Allegro Capital, Goldman Sachs and Kotak Investment Banking acted as financial advisers for Manipal and TPG on this deal. Standard Chartered acted as financial adviser to Fortis.

AZB Partners served as legal advisers for Manipal and TPG, and Cyril Amarchand Mangaldas for Fortis.