Hospital chain Fortis Healthcare (India) Ltd will buy Singapore-based sister firm Fortis Healthcare International in a move to bring all of the group's health businesses under one company, boosting the listed firm's shares.
Terms of the all-cash deal will be set by an independent valuer and the transaction will be closed by December, Chairman Malvinder Singh told Reuters. The board of Fortis Healthcare on Monday approved the buyout.
Both companies expect revenue of about $500 million each in the current fiscal year, including the listed firm's recently-acquired Super Religare Laboratories, according to the company.
"The deal presents both risk and opportunity for Fortis India," said Rashesh Shah, an analyst with brokerage ICICI Securities, who has a 'buy' rating on the stock with a target price of 185 rupees.
Shah said the move was a surprise, and said the valuation would determine whether or not it's a good deal for the listed firm's shareholders.
Shares in Fortis Healthcare, valued at about $1.3 billion, were up 1.2 percent at 148.90 rupees at 0753 GMT, having risen as much as 5.1 percent after the news.
The billionaire Singh brothers, Malvinder and Shivinder, last year set up Fortis Global, later renamed Fortis Healthcare International, to pursue overseas business after losing out to Malaysian state investor Khazanah in a battle for Singapore's Parkway Holdings, then Asia's biggest listed hospital operator.
Since then, Fortis International has made seven acquisitions across the Asia-Pacific region, making it the size of the Indian operation, and Group Chairman Singh said the group plans to invest about $1 billion in the combined businesses over three years.
Fortis was planning to list two of its health care entities in Singapore in public offers worth up to $1.5 billion, IFR, a unit of Thomson Reuters reported in April.
"Equity markets are not in good shape. That could be a reason that they have decided to combine it to fund further acquisition," ICICI's Shah said.
Malvinder Singh did not comment on the group's plans to list Fortis International or a property trust holding Indian hospital buildings.
INTERNATIONAL FOCUS
Last year, Fortis Healthcare International agreed to buy the healthcare assets of Hong Kong-based Quality HealthCare Asia Ltd.
It has also bought Australia's Dental Corporation Holdings, Sri Lanka's Lanka Hospitals Corp Plc, Vietnam's Hoan My Medical Corp and a Singapore hospital bought from First Real Estate Investment Trust.
"In another six months, international will be bigger than India," Malvinder Singh said.
"If you are to club the two entities together you really double the business and the size and scale, the capability. The infrastructure, the management depth and the medical talent that you end up creating is absolutely phenomenal."
The Singh brothers set up a privately-owned firm to make overseas forays because of jitters among the Indian firm's shareholders after the Parkway bid.
"Internationally, we said as a family, we will seed the businesses, seed the investments because if you put all of that into the Indian entity there might be diffusion of focus, a higher degree of risk," Malvinder Singh said.
He said investors are now more comfortable with Fortis' international ambition.
After the buyout, Fortis International will become a wholly-owned unit of Fortis Healthcare (India), which will be named Fortis Healthcare. Vishal Bali, currently the head of Fortis International, will be the group's global CEO.
"Acquisitions will continue to happen. As we continue to go through that route, we will continuously evaluate various capital raising opportunities in different markets," Singh said.
After the merger, Fortis Healthcare would have over 12,000 beds across 74 hospitals in 10 countries.
Religare Capital markets, part of financial services firm Religare Enterprises that is also controlled by the Singh brothers, advised Fortis Healthcare International.
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