Fortis Healthcare Ltd said on Tuesday it will initiate a fresh bidding for its sale as the winning bid of the consortium of Hero Enterprise Investment Office and the Burman Family Office stands mutually terminated.
Interested parties are invited to submit their bids by 31 May 2018, Fortis said in a stock market disclosure.
The Fortis board has decided to invite three of the earlier bidders—Munjal-Burman, TPG-backed Manipal Health Enterprises Pvt. Ltd and IHH Healthcare—based on their suitability earlier.
While Munjal-Burman was selected as the winning bid on 10 May, TPG-Manipal consortium and IHH had extended the validity of their offers.
The shortlisted bidders will be announced on 1 June, and the binding bids will have to be submitted on 14 June, said Fortis.
The shortlisted bidders will be provided 10 days for financial and legal due diligence and will interact with the management and advisors who have conducted vendor due diligence (VDD) for the company.
Hence, they will get access to the online data room comprising of financial statements including unaudited balance sheet of the latest financial year through 31 March 2018, the status of major litigations and investigations against the company, and financial VDD reports of its diagnostics chain SRL and the company itself.
Following this, the binding bids should address certain objectives such as minimum investment of Rs 1,500 crore by way of preferential allotment; plan for providing an exit to private equity investors of SRL; and plans for retention of current management and employees.
The binding bids should also have a plan for funding the acquisition of Singapore-based RHT Health Trust (RHT). The entire portfolio of RHT comprises two hospitals, 12 clinics and four new clinics into Fortis. These hospitals and clinics are operated by RHT Health subsidiaries International Hospital Ltd, Fortis Health Management Ltd, Fortis Hospotel Ltd, Escorts Hearth and Super Speciality Hospital Ltd, and Hospitalia Eastern Pvt. Ltd. All these companies will become Fortis subsidiaries after the proposed acquisition is completed.
The binding bids should also be unconditional but they would need regulatory and shareholders’ approvals and they should include sources of funds to finance the transaction, Fortis said.
The submitted binding bids will be evaluated by the Fortis board, in consultation with its financial advisors, Standard Chartered Bank and Arpwood Capital Pvt Ltd, and legal advisors, Cyril Amarchand Mangaldas and Vaish Associates.
Bidding wars and board upheaval
Fortis had been looking for buyers for more than a year but legal cases against its founders, brothers Malvinder Singh and Shivinder Singh, deterred potential investors. However, suitors began eyeing Fortis when the siblings lost control of the company in early March after lenders seized the shares they had pledged to take on loans.
In late March, Fortis agreed to sell its hospital business to TPG-Manipal.
But the decision led to an outcry from some minority shareholders on concerns the TPG-Manipal offer undervalued Fortis. This opened the door for other suitors to bid for the company.
Subsequently, Malaysia’s IHH Healthcare, the consortium of Munjal-Burman, China’s Fosun and KKR-backed Radiant Life Care Pvt. Ltd offered to invest in Fortis. As the bidding war intensified, TPG-Manipal, IHH Healthcare, Munjal-Burman and Radiant Life revised their offers by one or more times.
Finally, on 10 May, the Munjal-Burman consortium was selected as the winner of the takeover battle. However, the decision to select the Munjal-Burman consortium was likely made against the opinion of some of the board advisers and had not gone down well with a section of the company’s shareholders.
Within days of the winning announcement, TPG-Manipal raised the offer to buy Fortis and later extended its validity period. IHH Healthcare also extended the validity period of its offer.
At the same time, there has been a dramatic upheaval at the Fortis board.
Shareholders last week voted to remove Brian Tempest from the board, who was one of four directors appointed to the board by the Fortis founders, brothers Malvinder and Shivinder Singh. The other three had quit even before the shareholders’ meeting took place to decide their fates.
Investors Jupiter India Fund and East Bridge Capital had demanded that the four directors quit the board because, by selecting the Hero-Burman bid, they had failed to work in the interest of the company’s shareholders.
The board now has only four directors. While voting out Tempest, Fortis shareholders also approved the appointment of three new directors — Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee – whose names were recommended by the activist investors. The fourth remaining board member is Rohit Bhasin.
Meanwhile, Fortis is tackling some legal issues. Early Tuesday, Fortis said that a Delhi High Court committee has asked one of its subsidiaries—Fortis Escorts Heart Institute & Research Centre Ltd—to pay Rs 503 crore ($74.6 million) within a month for alleged unwarranted profits.
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