IHH to subscribe 235.29 mil new shares or 31.1% stake in Fortis for RM2.35 bil

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KUALA LUMPUR (July 13): IHH Healthcare Bhd has entered into a share subscription agreement (SSA) with Fortis Healthcare Ltd (Fortis) for the proposed subscription of 235.29 million new Fortis shares or about 31.1% of the total voting equity share capital of Fortis for a total consideration of INR4,000 crore (about RM2.35 billion) at a share price of INR170 (about RM9.98) per share, according to its filing with Bursa Malaysia today.

The agreement was entered into by Northern TK Venture Pte Ltd (NTK), an indirect wholly-owned subsidiary of IHH and a direct wholly-owned subsidiary of Parkway Pantai Ltd (PPL).

Pursuant to the board resolution dated July 13, 2018 passed by the board of directors of Fortis approving the proposed subscription and execution of the Fortis SSA, IHH has also announced an open offer to Fortis shareholders to acquire up to 197.03 million of Fortis shares, representing about 26% of the expanded voting share capital.

The offer price per share for Fortis open offer is made at a price of not less than INR170 (about RM9.98) or such higher price as required under the Securities and Exchange Board of India (SEBI) (SAST) Regulations.

The filing said a total consideration of about INR3,349 crore (RM1.97 billion) will be payable, assuming the open offer for Fortis is at INR170 per share. The filing also noted Fortis open offer is a mandatory offer made in compliance with SEBI (SAST) regulations, as the proposed SSA will make IHH a major shareholder of Fortis.

Fortis open offer is not subject to completion of the proposed subscription and will proceed in the event the proposed subscription does not complete, IHH added.

The subscription price made for Fortis was arrived at after taking into consideration Fortis' historical and prevailing market price, expected cash flows of the company, its earnings potential and growth prospects, rationale of the proposals, trading multiples of certain comparable companies and the audited net assets of Fortis at about INR53.17 billion as at March 31 this year.

IHH also made an open offer to acquire up to 4.89 million shares of Fortis Malar Hospitals Ltd (Malar) or about 26% stake at a price of INR58 (about RM3.40) per Malar shares. The Malar open offer is triggered as Fortis indirectly holds 62.4% stake in Malar, through its wholly-owned subsidiary Fortis Hospitals Ltd.   

This was pursuant to both the SSA and open offer to Fortis shareholders, which could see IHH hold about 432.32 million Fortis shares, representing about 57.1% stake of the expanded voting share capital of Fortis, thereby acquiring control of Fortis.

The total consideration payable by IHH is about INR29 crore (about RM17.0 million), assuming full acceptance.

The price consideration for Malar was arrived at after taking into consideration the volume weighted average market price of the shares of Malar during a period of 60 trading days.

The mode of settlement for three proposals will be satisfied entirely by cash.

The source of funding for the proposals will be through external borrowings of RM1.59 billion and internally-generated funds of RM2.75 billion, the filing said.

The proposals represent an opportunity for IHH to further expand its growth footprint in India, given India’s tremendous growth potential with the rising demand for quality private healthcare, it added.

“The proposals are expected to propel IHH to become a leading Pan-Indian hospital operator, operating more than 5,400 beds in 37 hospitals. India is IHH’s fourth home market after successful re-calibration of IHH’s growth strategy in India, to focus on inorganic growth,” the filing read.

In another separate filing with the bourse, IHH said trading of IHH shares has been halted with effect from 9.22am today and will only resume from 2.30pm onwards.

As of writing, IHH share price has fallen by 0.34% or 2 sen to RM5.95, with only 7,000 shares traded, prior to the trading halt.