Fortis Healthcare Ltd has decided to demerge its diagnostics business, including the business of its majority owned subsidiary SRL Ltd into its another listed entity, Fortis Hospitals Ltd. Following the demerger, the business of SRL will be merged with the Chennai-based Fortis Malar as part of the composite scheme.
With the demerger, all the diagnostics business of the Group would come under the entity, which is currently the Fortis Malar Hospitals while the latter’s hospital business will be sold to Fortis Healthcare by way of slump sale for a cash consideration of Rs 43 crore.
Fortis has two listed entities, Fortis Healthcare and Fortis Malar, and the idea is to bring all the hospital businesses under Fortis Healthcare while all the diagnostics business will be brought in under the second listed entity, subject to statutory and regulatory approvals. The name of Fortis Malar will subsequently be changed to SRL Ltd and the company is proposed to be listed on the National Stock exchange in addition to its current listing on the BSE.
With the composite scheme coming into effect, Fortis Malar would issue and allot 0.98 fully paid up equity shares of Rs 10 each for every 1 equity share of Rs 10 each held by them in Fortis Healthcare.
The equity shareholders of SRL, except for Fortis Malar who will acquire shares of SRL following the demerger, will be issued and allotted 10.8 equity shares of Rs 10 each of Fortis Malar for every one equity share of Rs 10 each held by them in SRL, as a consideration towards the merger of SRL into Fortis Malar.
Appointed date of slump sale, demerger and merger under the composite scheme is opening of business on January 1, 2017, subject to regulatory and statutory approvals.
“We believe this will unlock immense value for all the shareholders,” said Malvinder Singh, executive chairman, Fortis Healthcare. As a result of the new synergistic groupings, both the hospitals and diagnostic businesses will benefit from greater clarity, a stronger focus and an independent growth trajectory,” he added in an announcement.
While both the businesses continue to perform equally well, in the longer term, both need distinctive strategies of their own and the demerger will help to unlock the value potential, said Bhavdeep Singh, CEO, Fortis Healthcare Ltd.
At present, both Fortis Healthcare and Fortis Malar manage hospitals along with providing diagnostics business, while another majority owned subsidiary SRL is engaged in diagnostics business. The hospitals and the diagnostics business have different operating models and each has strong growth opportunity given the trend.
The proposed restructuring would offer greater focus equally on the both the businesses and would simplify the organisational structure helping investors to better understand and evaluate both businesses independently, said the company.
Promoters of Fortis Healthcare own a fully diluted stake of 63.1 per cent in the company with the rest of the shares held by public shareholders. Fortis Healthcare owns 56.4 per cent stake in SRL.
Fortis Healthcare owns 62.4 per cent shares in Fortis Malar, a multi-speciality facility acquired by Fortis in September 2007.
Post transaction, the promoters will own 40.6 per cent equity shares in Fortis Malar, which will be renamed as SRL, the listed entity Fortis Healthcare will hold 1.3 per cent and the public will hold 20.8 per cent. The public shareholders in both SRL and Malar, including the private equity investors and other financial instituions, will hold the rest of 37.3 per cent, according to a company announcement.
At present the Group has 45 healthcare facilities with around 10,000 potential beds across various countries, including projects under development, and around 329 diagnostics facilities offering close to 3,800 tests and 7,300 collection points across the country, and cumulatively performs more than 33 million tests annually, said company officials.
JM Financial is advisor to Fortis Healthcare on the transaction, while Yes Securities (India) Lts is advisor to Fortis Malar on regulatory and related requirements. PWC were the advisors on the structuring of the transaction and Price Waterhouse & Co LLP did the valuation.
Fortis Healthcare approves demerger of diagnostics business
