It seems like a Tarantino film where the different contenders have a shoot-out at the end, says a healthcare observer on the Fortis Hospitals imborglio.

Dramatic though that may sound, it illustrates the road ahead for Fortis as its board of directors evaluate the different proposals laid at its doorstep. Four at last count, the last proposal was from China's Fosun Health Holdings , disclosed late on Tuesday night. But with one more night to go before Fortis' board meets on Thursday to decide who to go with, Fortis-watchers will not be surprised if another contender gets its foot in the door with an offer.

Presently in the arena stand the Manipal Hospitals-TPG combine, Malaysia's IHH Healthcare Berhad, the Munjal/Hero-Burman group and now Fosun. And a bidding race may seem imminent.

Manipal-TPG ahead in bidding race?

But will Manipal-TPG, the first off the block with a comprehensive plan for Fortis get involved in a bidding race to the finish? Unlikely, says an industry representative familiar with the details. “The other offers coming in are at Rs 5 or so more than the original bid and that shows they don’t have a comprehensive plan or leadership like the Manipal bid has,” the representative said. And if the stakes get pushed higher to Rs 170 or so per share, the Manipal-TPG combine are more likely to “step aside” than revise their bid again, the representative observed.

The explanation for why another revised bid may not come from first-bidder Manipal is because their 18 month due dilligence had considered various financial troubles and investigations facing Fortis, besides investigations on the Government front. The other bids seem hurriedly cobbled together, though some of the contenders had looked at the asset earlier as well. Their bids do not reflect a long-term strategic intent, considering that they are sitting on much cash, points out a source.

Manipal-TPG's revised offer after addressing shareholder concerns including valuation stands at Rs 155 per share compared to IHH's offer that mentions “up to Rs 160” and the Munjal-Burman's offer of Rs 156 apiece or the floor price for the preferential allotment, whichever was higher. Fosun's $ 350 million offer includes and initial investment of Rs 100 crore, and the primary infusion is pegged at Rs 156 per share.

Uncertainity “bleeds”

“With more noise comes more uncertainly,” says another healthcare-watcher and uncertainity can cause Fortis to “bleed”. Creditors lending money will become more demanding and Fortis' hospital staff, doctors, nurses etc will become a good recruiting pool for other hospitals that offer greater stability, he said, sounding a note of caution that “flakey” distractions erode an already stressed asset.

When the Munjal-Burman offer was made, some industry players wondered if the offer to invest Rs 500 crore initially into Fortis was good to tide over the immediate crisis. Investments of Rs 100 crore or Rs 500 crore are but a drop in the ocean, says an analyst, pointing out the absence of a plan to buy back the hospital assets from the Singapore-listed RHT Health Trust. Of all the publicly available proposals, only the Manipal Group addresses this, proposing a Rs 4000 crores rights issue allowing for greater shareholder participation.

Board members and shareholders will be evaluating if Fortis' many suitors have what it takes to walk the path fraught with risk. Despite the due dilligence, there is still a “creepy feeling” of an unknown liability popping up from the Daiichi Sankyo-Singh brothers legal tussle taking place in different courts, says a person familiar with the transaction.

All of the above factors will be important to Fortis' future in the event of a “face off” type situation, say if IHH launches a hostile offer for Fortis despite being turned down by the board. And Fortis's decision tomorrow will be key in unravelling who continues to dig in and participate in acquiring the hospital network and who decides to walk away.

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