Fortis Healthcare rises 11% on acquisition of Singapore-listed RHT Health Trust portfolio

November 16
00:45 2017
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Fortis Healthcare share price rallied as much as 11 percent on Wednesday after the board has approved the proposed acquisition of entire portfolio of assets of Singapore-listed RHT Health Trust (RHT) for an enterprise value of around Rs 4,650 crore.

It a major restructuring initiative aimed at consolidating the entire Indian asset portfolio comprising 12 clinical establishments, four greenfield clinical establishments and two operating hospitals of RHT Health Trust with Fortis.

Fortis and RHT have signed a term sheet and entered into an exclusivity arrangement proposing the acquisition of all the securities of RHT’s entities in India holding, clinical establishments and businesses via purchase of securities for an enterprise value of approximately Rs 4,650 crore, Fortis said in its filing.

This includes Rs 1,152 crore of debt of RHT as on date, it added.

Fortis said it is expected that a substantial part of net proceeds (after repaying debt) received by RHT would be distributed to its unit holders, including Fortis; thereby reducing net investment consideration that Fortis would incur.

Fortis is a controlling unit holder with an indirect interest of 29.76 percent in RHT.

“This restructuring is a significant initiative and will integrate RHT’s entire India-based asset portfolio into Fortis while also improving the overall financial health of the business,” Fortis Healthcare CEO Bhavdeep Singh said.

The proposed purchase of securities will be conducted on an arm’s length basis, he added.

The company said with Fortis’ completion of proposed current transaction; the cumulative expected incremental positive impact on EBITDA would be approximately Rs 270 crore. In addition, with the acquisition of 49 percent of Fortis Hospotel which is part of this proposed transaction, there will be an interest saving of approximately Rs 75 crore.

“The proposed transaction would be funded by Fortis with a combination of equity, quasi-equity and/or debt. Fortis has an enabling resolution in place to raise capital for up to Rs 5,000 crore,” Singh said.

The proposed transaction will be subject to the satisfaction of conditions precedent, including regulatory and shareholder approvals by Fortis, approvals by RHT unit holders and other approvals as may be required, he added.

The term sheet signed by both Fortis and the trustee-manager of RHT is intended to set out the basis for further discussion in respect of the proposed transaction.

Both Fortis and RHT have entered into an exclusivity period for 60 days commencing from the date of the term sheet with a view to executing definitive agreements for the proposed transaction.

Fortis has also entered into hospital and medical services agreements with entities held by RHT under which it pays service fees to such entities for services rendered.

For 2017-18, the net cumulative service fees to be paid by Fortis to RHT is estimated to be around Rs 270 crore.

“Upon completion of the securities acquisition, the service fees that Fortis was paying will be completely eliminated, thereby improving significantly its operating profitability,” Fortis said.

At 11:58 hours IST, the stock price was quoting at Rs 141.80, up Rs 11.35, or 8.70 percent on the BSE.

Other Singh Family owned stocks also rallied after this transaction. Religare Enterprises was locked at 10 percent upper circuit at Rs 46.20 while Fortis Malar Hospitals was quoting at Rs 63.45, up Rs 2.85, or 4.70 percent on the BSE.

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