This article first appeared in The Edge Financial Daily on April 13, 2018
KUALA LUMPUR: News of IHH Healthcare Bhd’s proposed US$1.3 billion (RM5.04 billion) bid for Fortis Healthcare Ltd, which would beat the offer from the TPG-backed Manipal Health Enterprises, evokes a sense of déjà vu for those who remember Khazanah Nasional Bhd’s acquisition of Singapore-listed company Parkway Holdings Ltd in 2010.
The takeover battle for Parkway then was between Khazanah and Fortis, as both sought to spearhead their expansion in the region’s booming healthcare market. As Parkway ran hospitals in Malaysia, Singapore, India and China, it was a suitable target for both Fortis and Khazanah at the time.
Fortis had acquired Parkway for about US$3.56 per share from TPG earlier in March 2010. TPG happens to be the opposing bidder to acquire Fortis this time around.
With at least a 24% stake in Parkway, Fortis had offered S$3.80 per share to acquire the remaining shares of Parkway in June 2010, only to be outdone by Khazanah’s offer of S$3.95 per share the following month.
Parkway shares last hit those levels in October 2007. At S$3.95 apiece, the offer valued the healthcare provider at about 31 times its 2010 earnings.
When Fortis finally gave in and accepted the offer, it made a profit of S$116.7 million. After Khazanah took Parkway off the market in 2010 after paying S$3.5 billion, it took out the concession assets in Pantai Holdings Bhd and injected the remaining 60% into IHH Healthcare.
Fast forward to today, IHH Healthcare appears to be facing a familiar battle. It is a similar script with the same characters but with different roles.
Bloomberg reported on Wednesday that Asia’s largest hospital operator, IHH Healthcare, had sent a letter to the Fortis board, saying it may be willing to pay as much as 160 Indian rupees (RM9.50) per share to acquire control of the Indian company.
The report said the offer came days after TPG-backed Manipal Health Enterprises Pvt had sweetened its offer to buy Fortis’ hospital operations and merge them with its own business with a revised plan that would give Fortis shareholders 155 Indian rupees per share in value, an increase from 140 Indian rupees earlier.
The offer of 155 Indian rupees valued Fortis at 80.396 billion Indian rupees or US$1.23 billion (RM4.77 billion).
If the Fortis board were to reject the offer, IHH Healthcare will consider taking its offer directly to the Indian company’s shareholders. When contacted, IHH Healthcare’s spokesman did not deny the report but declined to comment.
“We will make appropriate announcement(s) should there be any material developments,” the spokesman replied through an email.
The offer came about nine months after IHH Healthcare walked away from bilateral talks with Malvinder and Shivinder Singh, who were in control of Fortis at the time.
Recall that both Malvinder and Shivinder had resigned from the board of Fortis Healthcare on Feb 8 this year after being accused of funnelling out US$78 million from the group. This was after a high court order for the brothers to pay up to US$550 million to Daiichi Sankyo for allegedly luring the Japanese drug maker into a deal by withholding information.
The resignations were accepted by Fortis’ board on Feb 13.
On Feb 15, the Supreme Court allowed financial institutions to sell Fortis shares pledged to them by the company’s promoters Malvinder and Shivinder. The five lenders are Yes Bank, Axis Bank, RBL, ECL Finance and Indiabulls Housing Finance.
Yes Bank has reportedly acquired a 17.3% stake in Fortis Healthcare following the sale.
For IHH Healthcare, it would be its second attempt to acquire Fortis. Its latest offer is marginally higher than the competing bid and is also higher than its current share price of 153.8 Indian rupees but on par with its one-year average share price. The offer price by IHH Healthcare valued Fortis at about 18 times its last 12 months earnings.
If the deal goes through, it would be the second time where Fortis investors bowed out, allowing IHH Healthcare to expand its footprint in the booming healthcare industry in India, similar to back in 2010 when it gave way for Khazanah to acquire Parkway at a premium.