MUMBAI: Malaysia's IHH Healthcare Berhad on Thursday offered to buy India's Fortis Healthcare Ltd, sparking a potential three-way takeover battle for the company at a time when interest in Indian healthcare assets is rising.
IHH, one of Asia's largest healthcare operators, has bid 160 rupees ($2.45) per share for Fortis, topping a 155 rupees per share offer from Fortis's Indian rival Manipal Healthcare Enterprises Private Limited.
Fortis separately on Thursday received an investment offer worth 12.5 billion rupees ($191.5 million) from two Indian investors - Sunil Munjal's Hero Enterprise and the Burman Family Office, the private investment arm of the family that owns consumer goods firm Dabur India.
The keen interest in Fortis comes as Prime Minister Narendra Modi looks to implement an ambitious healthcare programme aimed at providing insurance cover to about half the population. The scheme is expected to increase patient numbers at private hospitals such as those run by Manipal and Fortis.
But even without it, an under-resourced Indian public health system has helped Fortis - with around 30 hospitals across India - and rival private-healthcare companies such as Manipal and Apollo Hospital Enterprise Ltd grow rapidly in recent years, tapping into demand for better healthcare.
Deloitte expects India's healthcare market will grow three-fold to $372 billion by 2022.
A lack of quality assets in healthcare in India also makes Fortis attractive, a source advising Fortis on the deal said, declining to be named. "A typical greenfield hospital can easily take five years to build and get running (in India)" the source said, adding that new suitors could not be ruled out.
In the last few months Fortis has faced investigations by India's Serious Fraud Investigations Office and the Securities and Exchange Board of India for financial fraud -- although Chief Executive Bhavdeep Singh has said he expects the probes to be over in the next 12 months.
Fortis is also saddled with a burgeoning debt pile. Its net debt was 13.39 billion rupees as of Dec. 31, and last month Fortis reported a net loss for the three months ended in September and December.
IHH, in a letter dated April 11 made public by Fortis on Friday, said it was offering to buy Fortis due to the "inability of the statutory auditors of (Fortis) to opine on its financial position as at Dec. 31, 2017 and regulatory investigations that are currently underway."
It said its offer would be a better option for Fortis shareholders than the Manipal offer, which would involve "complex steps over a prolonged period".
Manipal, seeking to expand its presence beyond southern India, first offered to buy Fortis last month, proposing a deal that would give control of the combined company to Manipal Chief Executive Ranjan Pai and U.S. buyout firm TPG Capital.
But Fortis's minority shareholders, including billionaire investor Rakesh Jhunjhunwala, said the price was low, forcing Manipal to sweeten the deal, valuing Fortis at 80.39 billion rupees.
The regulatory investigations, tightened credit, a lack of liquidity and a smaller board has "adversely impacted decision-making" at Fortis, IHH said in the letter, and asked Fortis to respond to its offer before April 18.
($1 = 65.2400 Indian rupees)