Fortis comes full circle with buyback of hospital assets

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Indian hospital operator Fortis Healthcare makes a return to a conventional business model with the buyback of its Indian hospital assets. It completed the acquisition late last year for a consideration of about ₹46.5 billion (US$653 million).

The company made a transition to an asset-light model in 2012, when it spun-off and listed its physical assets as a business trust in Singapore. However, in late 2017, Fortis decided to buy back the Indian assets – clinical establishments and hospitals – from business trust RHT Health Trust (RHT).

The deal involved the acquisition of equity securities, compulsorily convertible debentures and non-convertible bonds of the Indian entities from wholly owned subsidiaries of RHT.

Fortis now owns a 27% stake in RHT. The deal comes as Malaysian hospital operator IHH is acquiring a majority stake in the hospital operator.

Buying the assets is expected to bring value to Fortis and its shareholders, as it will save clinical establishment fees and rent that it currently pays to the business trust. It also provides Fortis full control over all assets, i.e. hospitals, enabling direct and more focused management of the business.

The assets that have been acquired include two hospitals and 16 clinics operated by the subsidiaries of RHT – International Hospital, Fortis Health Management, Fortis Hospotel, Hospitalia Eastern Private, Escorts Heart and Super Speciality Hospital.

The transaction is expected to result in significant improvement in Fortis’ operating profitability in terms of earnings before interest, tax, depreciation and amortization (EBITDA) and cash flows, while also leading to interest savings.

L&L Partners acted as adviser to Fortis, and AZB & Partners was the adviser to RHT Health Trust. The L&L team was led by partners Sundeep Dudeja and Vaibhav Kakkar, and consisted of managing associate Prashant Shah, senior associate Sahil Arora, and associates Debarpan Ghosh, Bhavini Singh and Keshav Pareek. They were supported by Harish Kumar, partner designate and Vivek Agarwal, managing associate. The AZB team included partner Dhruv Singhal and associates Shriyani Datta and Pooja Natarajan.