What Investors Need to Know About RHT Health Trust’s Proposal to Sell Its Assets

RHT Health Trust (SGX:RF1U) is a specialized health trust in Singapore’s stock market. It focuses on investing in medical and healthcare assets in India.

Two months ago, on 13 February 2018, RHT gave updates on the proposal to sell its entire asset portfolio to the India-listed Fortis Healthcare Limited, its current majority shareholder.

Fortis Healthcare first approached RHT Health Trust with an offer to acquire its assets back in November 2017.

From the update in February 2018, the final consideration offer by Fortis Healthcare is INR46,000 million, or S$948.45 million. The offer includes all of RHT’s assets: (1) its Indian subsidiaries; (2) its 49.0% interest in Fortis Hospotel Ltd; and (3) its interests in 12 clinical establishments, four greenfield clinical establishments, and two operating hospitals in India.

Details of the proposed transaction

RHT has estimated that the net consideration amount will be approximately S$710.6 million after factoring in the repayment of debt of S$237.9 million. This works out to around S$0.88 per unit.

RHT also said that it intends to distribute the estimated net consideration to unitholders as soon as it is feasible. After setting aside performance fees for RHT’s Manager, transaction costs, and expenses, the trust estimates that it would have final net proceeds of S$0.86 per unit available for distribution.

Upside for unitholders

At the time of writing, the estimated final net proceeds of S$0.86 per unit is a 10.2% premium to the last transacted price of RHT’s units of S$0.78. It is also 10% higher than the trust’s adjusted net asset value per unit of S$0.7975.

Fortis Healthcare’s acquisition offer thus gives unitholders of RHT the chance to realise their investment at an attractive valuation. RHT has said that the proposed sale of its assets would yield its investors a 65.5% return since its IPO (inclusive of all the trust’s distributions since listing).

Conditions of the proposal

Unitholders of RHT will have the final say on whether the proposed sale will go through. The longstop date of the transaction is on 30 September 2018. The longstop date is the latest date that the conditions related to the deal have to be fulfilled; otherwise, the deal will be cancelled.

As a unitholder, you should consider carefully the implications of the transaction and whether it makes sense for your investment objectives before voting. Some points to consider include whether RHT’s current portfolio of properties have greater upside potential if it’s held by the trust instead of being sold at the current time.

The Foolish bottom line

Even after RHT’s unit price jumped by 16.9% to S$0.83 on 13 February 2018 following the update on the deal with Fortis, the proposed sale still represents upside potential for the trust’s unitholders currently.

But, if the sale does not go through, the price of RHT’s units may start to decline as unitholders who expected the deal to be successful sell their stakes. Investors who are interested in RHT at the moment should only consider investing if they are willing to take on the risk that the proposed sale falls through.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.