KUALA LUMPUR -- IHH Healthcare confirmed Monday a non-binding offer to acquire Mumbai-listed Fortis Healthcare, seeking to strengthen its foothold in India.
In a filing to the Malaysian stock exchange on Monday, IHH, Asia's largest hospital operator by market capitalization, said it had made an offer of 160 rupees ($2.44) per share to acquire in Fortis on April 11. Both parties have yet to begin negotiations as Fortis has already entered into binding agreements with another bidding consortium led by Manipal Health Enterprises.
IHH's offer of 160 rupees per share is higher than the 155-rupee offer by Manipal. Fortis also received an offer from Hero Enterprise Investment Office and the Burman Family Office in the form of investments of up to 12.5 billion rupees.
Assuming that IHH is eyeing for a controlling stake of 51% stake in fortis, the deal is valued at a minimum of 3 billion ringgit ($771 million), based on an estimate by Malaysia's Public Investment Bank.
India is IHH's fourth key market after Malaysia, Singapore and Turkey. Fortis' chain of 45 health care facilities with around 10,000 beds across India, Dubai, Mauritius and Sri Lanka fits with IHH's plan of taking over existing brownfield operations. Building a new hospital usually takes much longer due to regulatory requirements.
But the bid for Fortis, India's second largest privately run integrated hospital group, may not be smooth sailing as the company has ran afoul of the law. In IHH's offer letter to Fortis, the Malaysia-controlled group highlighted challenges, including an ongoing financial fraud investigation by Indian authorities and the company's lack of liquidity.
News reports said Fortis' founders, brothers Malvinder Singh and Shivinder Singh, had resigned and given up their stakes in the group after siphoning off billions of rupees.
IHH told Fortis it has "deep financial resources and strong operational expertise" to navigate Fortis out of troubled waters and on to the right direction. In particular, IHH said it will be able to offer financing solutions and support during the ongoing investigations.
IHH has long indicated interest in Fortis. Last year, it almost clinched a deal for a stake in Fortis but the transaction fell apart because of legal tussles between Daiichi Sankyo, a Japanese pharmaceutical company, and the Singh brothers, according to India's Economic Times.
Khazanah Nasional, IHH's majority shareholder, once competed with Fortis to acquire Singapore's premium hospital operator Parkway Holdings. Khazanah won, privatized Parkway and reorganized its other health care assets into the present day IHH.