Fosun targets Fortis: A white knight or a dark horse?

Fosun targets Fortis: A white knight or a dark horse?
- April 19, 2018
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The emergence of Chinese conglomerate and serial acquirer Fosun International as the latest bidder for a stake in the beleaguered Fortis Healthcare is intriguing but not unexpected. Fosun’s surprise and audacious move for Hyderabad-based injectables maker Gland Pharma last year marked its entry into India. It outbid US drug giant Baxter in the final stages, handing out a cheque of over a billion dollars to the founders of Gland and buyout firm KKR.
Fosun has offered Fortis an initial funding of Rs 100 crore in 45 days and an investment of up to Rs 2,300 crore against an equity holding that will not extend beyond 25%. The primary infusion of capital, Fosun said, would be made at Rs 156 per share (Re 1 higher than Manipal’s offer) subject to successful completion of the due diligence exercise in about three weeks.

Piece in a game

As with the Gland purchase, the bid for Fortis is a move to string together a global network of production facilities with an expanding pool of patients. On board Fortis, Fosun can gain experience and expand into the steadily growing Indian healthcare market, now getting an even bigger push from the BJP-led government’s high-decibel programme to make available health insurance to 500 million citizens.
The Gland deal enabled Fosun’s access to complex injectables technology that complements its expertise in high-volume manufacturing and help expand access to the global healthcare market.

String of acquisitions

With its diverse business interests, ranging from Lanvin, a French luxury brand, to an English football club Wolverhampton Wanderers, Fosun’s transformation into a global empire is regarded as a picture of China’s economic prowess. Last year, the conglomerate focused on acquiring Sisram, an emerging Israeli medical technology company.

In January, it joined hands with fellow Chinese firm Sanyuan to acquire French margarine maker St Hubert. Fosun’s journey into the latest medical breakthroughs include FosunKite, a research enterprise that offers the revolutionary advanced cellular immune therapy, CAR-T, in China.

The dealmaker chairman
At the nucleus of Fosun’s rapid expansion into a global business group is its chairman Guo Guangchang. With Guangchang at helm, Fosun has grown in the past 25 years, mostly on the back of acquisitions that logically fitted into its core businesses. Often known as China’s Warren Buffett, Guo Guangchang prefers to be his student instead. As much as he is seen as a newsmaker for his deals and buyouts, Guo Guangchang’s mysterious disappearance last year raised many eyebrows, only to be later rubbished by the company as rumors.

In a letter to shareholders last month, Guangchang said for Fosun, its vertical depth of industrial development and continuous enhancement of operational capability are now more important than the investments. Guangchang once said that running a business was like conquering a mountain. Will Mount Fortis be his next peak?