IHH’s Offer Most Rewarding For Fortis Shareholders, Says Proxy Advisory Firm IiAS

IHH Healthcare Berhad's bid for Fortis Healthcare Ltd. is best suited for shareholders when compared with other existing offers in their current form, said proxy advisory firm Institutional Investor Advisory Services.

IHH has committed to investing around Rs 7,400 crore in Fortis at Rs 175 per share, which is a premium of 11 percent to Friday's closing price on the BSE. The price, along with the option to exit through an open offer, are some of the key positives for Fortis shareholders, IiAS said in its latest note titled ‘The Battle For Fortis'.

The Malaysian company's lack of experience in the Indian market and the absence of a full binding offer, however, could be a negative for the shareholders of India's second largest hospital chain, the advisory firm added.

IHH and the Munjal-Burman families had raised their bids for Fortis on May 1. The Manipal-TPG consortium now has time till May 6 to revise its bid. The consortium in its latest bid in April had valued Fortis' hospital business at Rs 6,322 crore – a 20 percent increase from its previous offer of Rs 6,061 crore. It also proposed an immediate infusion of Rs 750 crore via debt.

The Munjal and Burman families had hiked their joint proposal to invest Rs 1,800 crore directly in Fortis. They had also proposed to invest Rs 800 crore by allotment of equity shares through a preferential issue at Rs 167 per share, in addition to an investment of Rs 1,000 crore via preferential issue of warrants priced at Rs 176 per share.

After IHH, the offer by Munjals and Burmans may be the most rewarding for shareholders since the entities are based in India, have made a full binding bid with a simple structure, IiAS said. The factors that could work against them include the lack of expertise in managing hospitals and the lack of an exit option for Fortis shareholders.

The offer made by Chinese healthcare provider Fosun will be the least beneficial from a shareholder perspective followed by KKR-backed Radiant Life Care's bid, the proxy advisory firm added.