Fortis Forms Advisory Panel To Review Takeover Offers

The board of Fortis Healthcare Ltd. today approved forming an advisory committee to evaluate “binding offers” for its healthcare and diagnostics businesses, amid a takeover battle.

The committee will function as an advisor to the board and provide its recommendations by April 26, Fortis said in a media conference call following the board meeting. The board will meet on that same day to decide the further course of action.

The advisory panel will be chaired by Deepak Kapoor, former chairman and chief executive officer of PriceWaterhouse Coopers, India. Standard Chartered has been asked to assist the expert panel and board, Fortis said.

Within the last one month, the troubled healthcare company had received binding offers from Manipal Health Enterprise Pvt Ltd., and Burman and Munjal families. Malaysia’s IHH Healthcare Bhd and the Chinese conglomerate Fosun International also entered the fray. This takeover battle began after founders Malvinder Singh and Shivinder Singh stepped down from the board amid allegations of siphoning funds. They also lost shareholding control due to mounting debt.

The board also decided to appoint Rahul Bhasin as independent director for a period of five years with immediate effect. It will seek shareholders’ nod for naming more directors, Fortis said in an exchange filing.

Here are all the takeover offers on the table:

Manipal Health

Ranjan Pai-led Manipal Health Pvt. Ltd. was the first to make a binding offer to Fortis. The first offer was a two-step deal to first demerge Fortis’ hospitals business into TPG-backed Manipal Hospitals. Fortis would later divest stake in its diagnostics business to Manipal Health.

However, that original offer was later revised after consulting minority shareholders who had expressed dissatisfaction with the structure of the deal.

The current offer has a “more favourable” swap ratio for Fortis shareholders by increasing the valuation of its hospital business. The new offer also involves a Rs 4,000 crore rights issue in which all shareholders will be allowed to participate, giving Fortis shareholders another chance to increase their holding.

IHH Healthcare

Asia’s most valuable hospital operator IHH Healthcare Bhd. had first proposed a potential bid of up to $1.3 billion to acquire control of Fortis. The Rs 160 per share offer topped that of Manipal. Fortis said that they couldn’t engage with IHH because of Manipal’s binding offer.

IHH later revised its offer too. It wants to infuse up to Rs 4,000 crore through a preferential allotment of equity shares at Rs 160 apiece. That’s to fund the buyout of RHT Health Trust assets and provide immediate liquidity for working capital and infrastructure upgrades.

The Munjals And Burmans

The Munjal and Burman families jointly entered the race for Fortis offering to invest Rs 1,250 crore through a preferential allotment. Later as the race intensified, they too improved their offer to a Rs 1,500 crore direct investment.

Sunil Munjal, chairman of Hero Enterprises, said they were willing to make an investment without any due diligence unlike IHH and Fosun.

Fosun International

Chinese conglomerate Fosun International was the last with an offer for Fortis.

It proposed injecting a preliminary amount of Rs 100 crore through a wholly owned subsidiary Fosun Health Holdings Ltd. within the next 45 days that includes an option of immediately subscribing to convertible debt instruments. That's on the condition if Fortis agrees to a one-month period of exclusivity for Fosun to undertake due diligence and negotiate a proposal to buy stake.

If Fortis agrees, Fosun will then consider a primary infusion of up to $350 million (about Rs 2,300 crore) at Rs 156 per share that would be inclusive of the earlier Rs 100 crore.

Can Fortis Handle A Takeover Battle?

Fortis Healthcare “lacks the necessary wherewithal” to make a decision on the offers it has on the table, according to report by the Institutional Investor Advisory Services.

The proxy advisory firm had earlier cautioned that Fortis’ board needs an advisory committee which will be in position to “discuss the issues threadbare, and arrive at a decision in everyone's interest”.

Three minority shareholders that hold up to 12.04 percent stake in Fortis have also called for an extra-ordinary general meeting to remove four existing board directors. iIAS suggested that the board should first identify the bidders that are serious about the company.