Fortis Initiates Fresh Bidding Process After Board Revamp

Fortis Healthcare Ltd. will invite fresh bids for control of India’s second largest hospital chain, its recently reconstituted board decided today.

The board has initiated a fresh bidding process and invited three bidders who had submitted binding offers in the last round – the Munjal -Burman combine, TPG-backed Manipal Health Private Enterprises Ltd., and IHH Healthcare Berhad. Consequently, the Munjal-Burman combine’s offer, that the previous Fortis board had recommended, now stands terminated, Fortis said in an exchange filing today.

The decision comes a day after the Munjals and the Burman families consented to reopening bids for Fortis. That’s after three independent directors on Fortis’ board resigned, and another – Brian Tempest – was voted out by shareholders in an extraordinary general meeting. All four board members had earlier voted in favour of the offer by the Munjals and Burmans.

The takeover battle for Fortis Healthcare started earlier this year when founders Malvinder Singh and Shivinder Singh lost shareholding control due to mounting debt and after lenders invoked pledged shares. They then stepped down from the board amid allegations of siphoning funds.

In addition to the three “invited bidders”, other interested parties can also participate in the second round of bids. All expressions of interest must be submitted by 5 pm on May 31 and the board will shortlist “other bidders” and inform them of its decision by June 1, the filing said. All bidders will then get 10 days for financial and legal due diligence and can interact with the management and advisors who have conducted vendor due diligence for Fortis.

The board listed the following necessary elements in the fresh bids:

• Minimum investment of Rs 1,500 crore into Fortis by way of preferential allotment.
• Plan for funding of Religare Health Trust acquisition, with a long stop date of Sept. 30, 2018.
• Plan for providing exit to private equity investors of SRL Diagnostics.
• Bids to be unconditional except for the regulatory approvals (to be specified in the bids) and approval from Fortis shareholders, to the extent required by law.
• Bids to include sources of funds to finance the transaction, including firm commitment letter(s) from lenders, if applicable.
• Plans for retention of current management and employee.

Watch this interview with Amit Tandon, founder and managing director of proxy advisory firm IiAS.