In a bid to sweeten its deal for Fortis Healthcare, Manipal Health Enterprises has proposed merging of both enterprises that pegs the value of the beleaguered Fortis at Rs. 8,358 crores. The buyout efforts of Manipal have been backed by US private equity firm TPG.

As per the new offer, it has been proposed to acquire a stake in diagnostics unit SRL from PE investors, allot preferential shares for raising funds and merge Manipal Health Enterprises Private Ltd (MHEPL) with Fortis Healthcare Ltd.

It has been broadly suggested that the new acquisition framework has been streamlined and processes have been simplified to reduce the time-frame for the merger to around 6-9 months than the envisaged limit of 12-18 months. An investment sum of Rs 3,300 crore has been earmarked by MHEPL with Rs 1,200 crore set aside for purchasing the PE stake in the SRL business and infusing Rs 2,100 crore into Fortis Healthcare.

The renewed acquisition offers envisage preferential allotment of shares at Rs. 160 per share entailing an investment of Rs.2,100 crore by MHEPL into Fortis Healthcare and enabling it to acquire a 20% stake. It is broadly estimated that funds sourced from the preferential allotment of shares will be utilized by Fortis as working capital, repay pending debts and partially fund the acquiring of its Indian assets from Religare Health Trust. The preferential allotment is seen as a much-needed minority fund initiative to inject immediate liquidity into Fortis Healthcare.

In an earlier offer which competed with three bidders, Manipal-TPG had offered to demerge the hospital business of Fortis Healthcare, valued at Rs.6,322 crore as of April 24. It was then proposed to merge the hospital business with Manipal Hospitals, whose value was pegged at Rs.6,070 crores.

Manipal-TPG is likely to undertake a restructuring of the diagnostics unit board after acquiring the SRL stake. This will be done to ensure that no promoter of Fortis Healthcare has a say in the SRL board. It has been stated by MHEPL that it shall be in a position to appoint a majority of SRL board directors till the merger of Manipal Health and Fortis is duly completed.

Manipal-TPG’s renewed offer is likely to be scrutinized by a two-member expert advisory committee in addition to bids submitted by Hero Enterprise Investment Office-Burman Family Office. IHH Healthcare Bhd of Malaysia and Radiant Life Care-KKR. A meeting will be held on May 10 by the Fortis Board to consider the offers and consequently, a call will be taken on the recommendations of the advisory committee, which remain non-binding on the Fortis Board.