The boards of Manipal Health Enterprises Pvt. Ltd, and Fortis Healthcare Ltd will meet in the next couple of days to approve the proposed merger of hospital chains of Fortis and Manipal, according to two people aware of the development.
“Most probably, the board meetings of Fortis and Manipal will take place on Tuesday or the day after to discuss the merger process. A plan to acquire a majority stake in SRL Diagnostics by Manipal Health will also be discussed at the Manipal board meet,” said the second person on condition of anonymity.
According to the new structure, hospitals under Fortis will be first hived off into a separate listed entity. The new listed entity will then merge with Manipal Group. This will allow for listing of Manipal group. Fortis Healthcare Ltd will become a holding company with stakes in the merged entity and in SRL Laboratories.
Manipal and PE fund TPG will invest about Rs3,000 crore to own majority in the new combined entity, said the first person on condition of anonymity. Out of the total investment, Manipal will pump in about 60-70% while TPG will invest the rest, he added. TPG Capital, the buyout arm of TPG Group, holds 25% stake in Manipal Health Enterprises Pvt. Ltd while Singapore-based sovereign wealth fund Temasek Holdings Pte Ltd holds 18% stake.
Spokespersons for Manipal Health and TPG declined to comment. Spokespersons for Fortis and Temasek declined to comment.
Mint had reported in January last year that TPG Capital had submitted a non-binding bid for a controlling stake in Fortis Healthcare and SRL Diagnostics, but the transaction did not materialize due to differences over valuation. IHH Healthcare Bhd, Asia’s largest healthcare group, was also in the race for acquiring Fortis Healthcare Ltd.
Fortis Healthcare currently has a market capitalization of Rs7,727 crore and liabilities of Rs3,406 crore against revenue of Rs4,573 crore in FY17, according to its audited financial results.
A legal battle between Japanese drug maker Daiichi Sankyo Co. Ltd and the Singh brothers remains a hurdle for selling Fortis as a whole entity. Daiichi, which claims the Singhs had suppressed material information when they sold Ranbaxy Laboratories Ltd to the Japanese drug maker in a $4.6 billion deal in 2008, has approached the Delhi high court for intervention and is blocking the Fortis sale.
Daiichi said in court that the Singh brothers were looking to get an investor in Fortis Healthcare and that the sale would dilute assets and hamper its efforts to recover damages from them. A Singapore tribunal had ordered the brothers to pay a sum of Rs2,562 crore to Daiichi Sankyo in damages.
This article was first published on LiveMint.com.