Malaysian private-hospital operator IHH Healthcare Bhd. (5225.KU) received approval to buy a significant stake in Fortis Healthcare Ltd. (532843.BY), one of India’s largest hospital operators, allowing the company to gain a foothold in India’s growing health care sector.
Fortis’ board has approved IHH’s plan to invest 40 billion Indian rupees ($583.6 million) via a preferential allotment to a wholly owned unit of IHH at 170 rupees a share, subject to approval of shareholders, Fortis said in a filing to the Mumbai Stock Exchange on Friday.
In a separate stock exchange filing to Bursa Malaysia on Friday, IHH said its unit, called Northern TK Venture Pte Ltd., entered into an agreement with Fortis for the proposed subscription of 235.29 million new Fortis Shares by way of preferential allotment representing some 31.1% of the total voting equity share capital of Fortis. This means IHH must make a mandatory general offer for the shares it doesn’t own to conform with India’s takeover rules.
IHH, the world’s second-largest health-care firm by market value after U.S.-based HCA Holdings Inc., outbid the only other competing offer from TPG-backed Manipal Health Enterprises Ltd., according to Fortis.
“The IHH proposal offers a more strategically and financially compelling proposition along with simplicity and certainty,” Ravi Rajagopal, chairman of the board of Fortis, said in a statement.
IHH, which counts Malaysia’s sovereign wealth fund Khazanah Nasional Bhd. as major shareholder, has expanded in Asia, Europe and the Middle East over the past five years. IHH’s expansion is driven in part by a growing affluent class that is willing to pay for better-equipped clinics and private hospitals.
IHH said on Friday that the proposals represent an opportunity for it to further expand its footprint in India, given India’s tremendous growth potential with rising demand for quality private health care.
“The proposals are expected to propel IHH to become a leading Pan-Indian hospital operator, operating more than 5,400 beds in 37 hospitals,” IHH said.
Fortis’ hospital chain consists of 45 healthcare facilities in India, Dubai, Mauritius and Sri Lanka, with a total of about 10,000 beds and 314 diagnostic centers, according to its website.
IHH will fund the deal via a combination of external borrowings and internally funds, according to IHH’s filing.
IHH added that the deal is expected to be completed in the fourth quarter of 2018 and isn’t expected to have any material effect on its earnings for this year.
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