NEW DELHI: After a marathon meeting, the Fortis board late on Thursday chose the Hero Enterprise-Burman Family offer as the preferred buyer for the country’s second largest hospital chain. The board selected this offer after considering recommendations of an expert advisory committee it had set up last month to evaluate binding proposals, the company said in a statement.
The joint bidders, Sunil Kant Munjal of Hero Enterprise and the Burman family of the Dabur group, have offered to invest a total of Rs 1,800 crore directly into Fortis Healthcare through preferential allotment of equity shares and convertible warrants. Provided all warrants are converted into shares, the infusion would see the joint bidders picking up 16.80% stake in Fortis Healthcare as a result.
“The board, post having the detailed discussions on the pro
s and cons of each offer, decided by majority, to recommend the offer of Hero Enterprise Investment Office-Burman Family Office…to the shareholders for approval,” Fortis stated in its filing.
The Fortis shareholders will now have to ratify the offer through a vote.
However, sources said the board was divided in its decision. While the original members of the board supported the Munjal-Burman offer, new members Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee were against it.
This could not be independently verified.
Chakraborty, Rajagopal and Banerjee were recently inducted into the Fortis board after they were nominated by East Bridge Capital and Jupiter Asset Management, minority shareholders seeking the removal of existing board members Brian Tempest, Lt Gen Tejinder Shergill, Sabina Vaisoha and Harpal Singh.
According to a joint representation made by these four board members, the shareholders had said they lost confidence in the suitability, bona-fides or independence of these members. These shareholders had also alleged that the board did not satisfactorily exercise its fiduciary duties towards all shareholders and the company.
“We are delighted that the board has accepted our offer, which is, unarguably, the best solution. We are sure that the shareholders will see the intrinsic value in our proposal and repose confidence in us,” Sunil Munjal of Hero Enterprise said.
“Fortis is a national healthcare asset which has a good spread across the country and we hope to help the company become what it ought to be,” added Anand Burman of the Dabur group. “The immediate plan of action for the Company should be to build on its strengths, retain talent, expand business, and institutionalise processes at Fortis.”
Munjal heads the Dayanand Medical College in Ludhiana, while the Burman family have built healthcare enterprises like Dabur Pharma, HealthCare at HOME and Oncquest.
JM Financial was the financial advisor to the Munjal-Burman during this process.
Standard Chartered Bank and Arpwood Capital were Fortis’ financial advisors and Cyril Amarchand Mangaldas was the legal advisor appointed by its board for this transaction.
Several contenders had been circling Fortis over the last 18 months, but had not put in concrete offers for the asset until earlier this year. Over the last month, the Munjal-Burman combine have been competing with binding offers by Manipal-TPG, IHH Healthcare and Radiant Life Care-KKR.
On April 19, the Fortis board had set up an expert advisory committee to deliberate on all binding offers for Fortis that do not require due diligence. The board met on Thursday to take a call on these offers.
In April, the Burman family of Dabur group also purchased warrants in Religare Enterprises that on conversion would give them a 9.9% stake in the company. The warrants were issued to three of their companies on a preferential basis. Anand C Burman and Mohit Burman said that they had invested in Religare due to private equity firm Bay Capital’s involvement in the company.
Share prices of Fortis on Thursday closed 1.33% higher than the previous close at Rs 152.45 apiece on the Bombay Stock Exchange, while the benchmark Sensex ended 0.21% lower.
In the run up to the board meeting, global institutional investment management firm York Capital Management also increased its stake in Fortis Healthcare to 6.25% through an open market acquisition, the company told stock exchanges on Thursday.