NEW DELHI | MUMBAI: Fortis Healthcare’s board is setting up an expert advisory committee under the leadership of Deepak Kapoor, former India CEO of PwC, to assess the binding bids for the company. This means nonbinding offers will not be considered, a setback for Malaysia’s IHH and China’s Fosun. They had both submitted nonbinding offers and sought time to conduct due diligence. Two binding offers have been submitted — by TPG-backed Manipal Hospital and the Munjal-Burman family offices.
However, contenders have until April 25 to submit binding offers, according to Brian Tempest, the Fortis director who chaired the meeting on Thursday.
The development comes as a section of minority Fortis shareholders has sought an extraordinary general meeting (EGM) to remove and replace four Fortis board members with three independent directors of their choice.
“It is fair to say that the Manipal (offer) is a binding bid… and the Burman (Munjal-Burman) one doesn’t require any due diligence,” Tempest said. “We’re just going to focus on those (offers) which are binding and don’t need any due diligence… this is the brief that we’ve given to the advisory committee.”
Panel to Report to Board by April 26
The deals proposed so far are not comparable as the Manipal-TPG offer is a structured deal in which the healthcare assets are to be acquired through a demerger. The Munjal-Burman offer proposes to inject cash directly into Fortis.
A Radiant-KKR offer, which was submitted on Thursday, is also not a binding one.
The expert advisory committee is to report to the board by April 26, when it’s scheduled to meet again on the issue. The board is not obliged to follow its recommendation, Tempest said.
IHH is considering the submission of a binding bid, ET has learnt, but this would involve investing Rs 4,000 crore upfront, giving it a stake of more than 32%. This will trigger an open offer for another 25% stake that will cost another Rs 3,300 crore at the same price of Rs 160 per share if fully subscribed, giving it a 57.5% holding in Fortis for a total Rs 7,300 crore.
“We really want to make sure that it is a transparent process and actually we have been advised by a number of parties that actually this is one of the recommended ways of going forward,” said Tempest, adding that financial advisor Standard Chartered Bank will assist the expert advisory committee and the board.
Fortis Healthcare’s board forms expert panel to assess binding bids
“We are happy with the decision,” said Ranjan Pai, chairman, Manipal Education and Medical Group. “The board has appointed a committee of independent experts who will recommend the best transaction.”
“We are pleased to note that the board of Fortis Healthcare has found merit in our offer, which is simple, binding and is the quickest to implement,” said Sunil Kant Munjal, chairman, Hero Enterprise. “We believe that this is the only offer which is in the best interest of all stakeholders of Fortis.”
On Thursday, Radiant Life Care, backed by KKR, submitted an offer to immediately inject cash into Fortis by offering to buy Fortis Memorial Research Institute, its flagship hospital in Gurgaon, as well as Fortis Shalimar Bagh. It has made an offer of Rs 165 per share for Fortis Healthcare, ET has learnt. Radiant-KKR is also offering Rs 3,600 crore to spin off the SRL Diagnostics arm. Fortis shareholders would get shares of SRL in this deal, persons aware of the development said.
Fortis ended at Rs 148.45, up 2.66%, after having shot up 5.2% just before the close. The benchmark Sensex ended 0.28% higher.
Fortis is legally required to hold an EGM as sought by stakeholders National Westminster Bank Plc, East Bridge Capital Master Fund Ltd and East Bridge Capital Master Fund I Ltd, Tempest said.
The shareholders, who together hold more than 12% stake in the company, want to remove Tempest, Harpal Singh, Sabina Vaisoha and Tejinder Singh Shergill from the board. They are also seeking the appointment of Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee as independent directors.
The EGM is likely to be held by the end of May, according to Tempest.
Subject to shareholder approval, the Fortis board has also approved the appointment of Rohit Bhasin as additional director (independent) of the company “with immediate effect” for a period of five years. Bhasin was previously senior partner in the deals practice of PwC and India head of the valuation and strategy team, Fortis said.
Offers have poured in for Fortis over the last three weeks after minority shareholders expressed their disappointment with the valuation proposed by Manipal-TPG on March 27. Manipal-TPG last week submitted a revised offer, which analysts estimated had increased its valuation of the Fortis hospital portfolio by around 21%, pegging its shares at Rs 155 apiece, ET reported on April 11.
Earlier on Thursday, IHH had made its proposal to infuse Rs 4,000 crore at Rs 160 per share, thereby valuing it at about Rs 12,000 crore (post equity).
Sunil Munjal’s Hero Enterprise Investment Office and the Dabur group’s Burmans have also raised their joint bid, offering to infuse Rs1,500 crore into Fortis without any due diligence. They asked for two seats on the Fortis board instead of one earlier.
Last week, they had proposed to infuse Rs 1,250 crore, with Rs 500 crore invested upfront and the remaining Rs 750 crore after three weeks’ due diligence.