IHH Healthcare to launch 100-day turnaround plan for India's Fortis

PETALING JAYA: IHH Healthcare Bhd, which could pump in as much as RM4.33 billion for the much coveted interest in India's Fortis Healthcare Ltd, will put in place a 100-day turnaround plan to guide Fortis for immediate stabilisation.
IHH managing director and CEO Dr Tan See Leng, who defended the pricing and structure of the deal, stated that IHH will quickly resolve the overhang in cash-strapped Fortis and renegotiate credit lines, including covering overheads and payment of wages to staff and vendors, to ensure that the hospital group can return to normal operations.
"On top of that, we've a standard global procurement pricing arrangement with some of the big vendors. We will be leveraging on what we have today and it should provide fairly good results in the short term," Tan said in a media briefing teleconference call last Friday.
IHH, which has had an operating presence in India since 2002, will work towards facilitating margin improvement within key Fortis hospitals and in its diagnostic business, leveraging on benefits from the sharing of best practices between doctors and medical staff across its global network. It will also build SRL Diagnostic into a laboratory powerhouse and part of a global laboratory franchise, implementing strong corporate governance standards.
On Friday, IHH announced that its wholly owned subsidiary Northern TK Venture Pte Ltd was the preferred bidder to acquire a 31.1% stake in Fortis, making it the largest shareholder. IHH will pay RM2.35 billion or 170 rupees (RM9.98) a share for the stake, which will trigger a mandatory open offer for public shares of a further 26% interest in Fortis. The moves will also trigger a mandatory tender offer for a 26% stake in Fortis' listed subsidiary, Fortis Malar Hospitals Ltd, which operates a multi super-specialty corporate hospital in Chennai.
The deal will be funded with existing cash reserves and debt facilities.
"The acquisition of Fortis is a transformational opportunity to increase and deepen our presence in India," said Tan.
Fortis is the second largest player in India by number of hospitals, operating a network of 34 hospitals across the country and internationally with a capacity of over 4,600 beds and employs more than 2,600 doctors and 13,200 support staff who catered to 2.6 million patients in FY2018.
Fortis' hospitals are complementary to IHH's existing South India-focused portfolio, and provide access to a leading platform with pan-India presence and a strong position in the North India market. IHH will benefit from the attractive upside potential in the underserved Indian healthcare infrastructure market.
"Post acquisition, we expect IHH's revenue to increase 23.7% to RM14 billion per year. The number of hospitals we have will also significantly increase from 49 to 83 and our exposure to India by revenue will also jump from 6% to 24%," said Tan.
He deems the offer price for Fortis as reasonable and prudent, based on available information on Fortis and findings from its own due diligence.
Tan stressed that IHH adopted a disciplined approach throughout the bidding process – and requested the necessary due diligence process and audited financial statements to ensure transparency. He highlighted that IHH did not put in a fully binding offer prior to due diligence.