Singapore:Last week, Trustee-Manager of RHT Health Trust, a business trust listed on Singapore Exchange (SGX), announced completion of process of disposing its entire portfolio of healthcare assets.
Fortis Healthcare, a listed company in India and, also controlling unitholder with a 30 per cent stake will pay 895.55 million Singapore dollars ($660 million) including debt of some 220 million Singapore dollars.RHT Health Trust, which was originally named Religare Health Trust, netted Fortis about 510 million Singapore dollars when it listed in October 2012.
It was then largest IPO of a business trust sponsored by an Indian company in Singapore and second largest primary listing in Singapore that year.In November 2017, Fortis announced its intention to buy over assets of RHT.
The deal is aimed at consolidating entire portfolio of RHT Health, comprising two hospitals, 12 clinics and four new clinics into Fortis.
These hospitals and clinics operated by RHT Health subsidiaries International Hospital Ltd, Fortis Health Management Ltd, Fortis Hospotel Ltd, Escorts Heart and Super Speciality Hospital Ltd, and Hospitalia Eastern Pvt Ltd will now all come under Fortis umbrella.
All these companies will become Fortis subsidiaries after acquisition.On Friday, RHT announced that it will distribute 0.752 Singapore dollar per unit to unitholders within 45 calendar days from completion of disposal in accordance with requirements of SGX.
This was in fulfilment of its commitment to distribute 95 per cent of net proceeds from sale to unitholders.
It will retain 32 million Singapore dollars as undistributed proceeds to cover on-going expenses of Trust while it seeks a new business.As a result of disposal, RHT will ceased to have any operating business and its assets consist wholly or substantially of cash, and hence RHT is now deemed to be a cash trust.If no new business is found for what remains of RHT within 12 months, SGX will require RHT to delist from Exchange.
A maximum 6 month extension to 12 month period is possible if a definitive agreement for acquisition of a new business has been signed and provided acquisition must be completed within 6 month extension.Why did Fortis set-up RHT in first placeBack in 2012, then Fortis Healthcare executive chairman, Malvinder Singh was quoted saying, "increasing demand-supply gap in healthcare delivery requires a significant increase in investment.
By pursuing this model, we are focusing on our core strength of delivering superior healthcare services with an emphasis on specialisation and widening access to quality medical care."It appeared then that Fortis was following an emerging international business strategy of being asset light so that they can access funds to sustain and accelerate business growth.Why is Fortis buying back its assets less than 7 years after divestingWhen its intention was announced in November 2017, Fortis said, "transaction is beneficial and will be value accretive for company and its shareholders as it would save significant clinical establishment fees that Fortis currently pays."Bhavdeep Singh, Fortis Healthcare CEO, added, "This restructuring is a significant initiative and will integrate RHT's entire India-based asset portfolio into Fortis, while also improving overall financial health of business."Although on surface, buying back assets for 900 million Singapore dollars while only gaining 510 million Singapore dollars when listing in 2012 does not make business sense, a quick calculation will reveal that Fortis walked away with a gain of more than 100 million Singapore dollars after counting dividends it gained as a 30 per cent unitholder of RHT including final special distribution after disposal.Analysts are speculating that buying back its assets is an effort to strengthen Fortis balance sheet in advance of an attempt to sell part of company or to find a strategic partner.The company has been known to be talking to private equity funds as well as strategic investors including IHH Healthcare which is controlled by Malaysia's sovereign wealth fund Khazanah Nasional Berhad.IHH Healthcare acquired a 31.1 per cent stake in Fortis in November 2018 but has been stopped by Supreme Court from making an open offer for a further 26 per cent stake.The legal complication arose because of a court battle between brothers Malvinder and Shivinder Singh - former promoters of Fortis - and Japanese drugmaker Daiichi Sankyo.The Japanese company has been trying to stop sale of Fortis on grounds that it would hinder its ability to enforce an arbitration award against brothers, who Daiichi alleges withheld crucial information when they had sold drugmaker Ranbaxy in 2007.
The Delhi High Court has restrained Fortis from selling any assets without its permission.