Global private equity fund KKR & Co. Lp is in talks with the Singh brothers to acquire a controlling stake in hospital chain Fortis Healthcare Ltd (FHL), two people aware of the development said.
The talks are in a preliminary stage, the two added, asking not to be identified.
A KKR spokesperson declined to comment. A spokesperson for Fortis Healthcare said the company had already shared what needs to be about its fund-raising plans.
Last month, Fortis informed BSE that its board had approved enabling fundraising options of up to Rs5,000 crore, including but not limited to a qualified institutional placement and sale of foreign currency convertible bonds and recommended them to shareholders for their approval.
As of November 2016, Fortis Healthcare Holdings Pvt. Ltd (FHHPL), the holding company controlled by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, held a 67.5% stake in Fortis Healthcare.
If the deal materializes, KKR will also have to make an open offer for an additional 26% stake in Fortis to meet the takeover norms of capital markets regulator Securities and Exchange Board of India. As of Wednesday, Fortis Healthcare had a market capitalization of Rs9,120 crore.
Besides actively looking to buy a majority stake in Fortis, KKR is also considering a possible structured equity transaction in RHC Holding Pvt. Ltd (RHC), which is the holding company for the Religare and Fortis brands, said one of the two people mentioned in the first instance.
RHC Holding is in talks with Nomura Capital (India) Pvt. Ltd and Edelweiss Financial Services Ltd to help refinance its debt, Mint reported in November.
RHC has been exploring various options to refinance mounting debt at the group level and has held separate discussions to monetize various assets such as its non-banking finance company (Religare) and the hospital chain (Fortis), the second person added.
At the group level, total debt had risen to Rs4,700 crore as of 31 March 2016 from Rs3,831 crore in June 2015. More recent numbers aren’t available.
“The deal will be structured more or less similar to Advent International’s acquisition of Crompton Greaves Consumer Electricals Ltd (CGCEL),” said the second person.
Advent entered into a share purchase agreement with Avantha Holdings Ltd, the promoter of Crompton Greaves, whereby Advent acquired 34.37% of CGCEL for Rs2,000 crore in April 2015.
In May last year, Advent and co-investor Temasek Holdings Pvt. Ltd, the Singapore-based investment firm, launched a Rs1,695 crore open offer to acquire an additional 26% stake.
The Economic Times reported last month that the Singhs were also talking to private equity firm TPG Capital on a minority stake sale in Fortis.
A change in the outlook for FHHPL’s long-term rating reflects a significant increase in the total debt of FHHPL and RHC Holding in FY16 to support various subsidiaries and to meet rising financial costs, Icra Ltd said in a May 2016 report. A large part of this debt is short term in nature and in the absence of any meaningful income from its subsidiaries, RHC remains exposed to an asset-liability mismatch and is highly dependent on the timely refinancing of its loans, the report added.
Fortis operates 45 hospitals (including projects under development) in India, Dubai, Mauritius and Sri Lanka. It also has around 330 diagnostic centres.
Source: Mint