Three leading private equity firms — TA Associates, Warburg Pincus and ChrysCapital – have been shortlisted from a group of five suitors for acquiring up to 44% equity stake in SRL Ltd, the diagnostics arm of Fortis Healthcare, multiple sources said.
The three shortlisted bidders have proposed offers that peg the valuation of SRL between Rs 3,700-4,200 crore, people aware of the matter said.
NY Jacob Ballas, Siguler Guff & Co and International Finance Corporation, whose exit from diagnostics company SRL Ltd was stalled after a legal setback, have restarted the process of selling their combined 31.5% stake and had appointed Kotak Mahindra Capital Company as merchant banker for the proposed divestment, ET had reported in its edition on June 6.
In addition to this, two other investors — Axis Bank (5.5%) and the family of Gurinder Singh Dhillon of Radha Soami Satsang Beas (5%) — may also exit the diagnostics company if they get the same terms. If these shares are also sold, the new owner may well end up controlling 40-44% of the company, said a person familiar with ongoing negotiations.
Fortis owns about 56% in its diagnostics arm. Incoming investors will have to fork out at least Rs 1,750 crore or $250 million, but the final deal size will depend on how much stake they eventually acquire, the person mentioned above added on condition of anonymity.
Shortlisted bidders held management meetings with the Fortis leadership and representatives from Malaysia’s IHH Healthcare in the first week of November, sources said. They were asked to revise their financial offers.
IHH, which owns a significant stake in Fortis, is facilitating the transaction. IHH has a preference for an investor who will play a passive role, according to people in the know. Some of the suitors have asked for rights to replace key management personnel at SRL, though this could become a stumbling block in the deal as IHH Healthcare is said to be averse to allowing this.
TA Associates, Warburg Pincus and ChrysCapital declined to comment when contacted.
Mails sent to Jacob Ballas, Siguler Guff and IFC went unanswered.
Originally five private equity firms had shown interest for this significant minority stake. New Silk Route and West Bridge Capital also participated in the preliminary round of discussion, sources said.
IHH Healthcare, which proposed to buy out the private equity firms following its acquisition of Fortis, couldn’t proceed with the plan after the Supreme Court stayed its open offer for Fortis Healthcare shares on a plea by Daiichi Sankyo.
The Japanese drug maker is seeking implementation of an arbitration award payable by the former Fortis promoters.
Stuck in a legal logjam, IHH decided to help the private equity firms sell stakes and provide comfort to incoming investors in terms of board positions and exit routes such as listing or buyback, the person said.
IHH Healthcare acquired Fortis Healthcare and completed the deal in November 2018, buying a 31.1% stake through a preferential allotment of shares.
IHH infused Rs 4,000 crore into Fortis to stabilise the business, but an additional? 3,400 crore put into an escrow account to initiate the open offer is stuck due to the Supreme Court-ordered status quo on the IHHFortis deal in December.
Source: Economic Times