Fortis board directors urge shareholders to take 'informed decision'

Fortis has called for an extraordinary general meeting (EGM) on May 22 to vote on the resolution of removal of four Fortis board directors

Right ahead of the Fortis Healthcare Ltd (FHL) board meet on May 10 to decide the fate of binding bids, four directors on the board of FHL have written to all shareholders urging them to take an 'informed decision' while voting on the matter of their removal. 

Two minority shareholders of the company had sought the removal of these directors last month. Fortis has called for an extraordinary general meeting (EGM) on May 22 to vote on the resolution of removal of these directors. 

East Bridge Capital and Jupiter India Fund, minority shareholders of Fortis, had called for the removal of the members of the board on the grounds that the board had failed to exercise its fiduciary duties towards all shareholders and has failed to maintain expected levels of corporate governance. 

Brain W Tempest, Harpal Singh, Sabina Vaisoha and Lt General Tejinder S Shergill, the four directors on the Fortis board have said in their open letter to shareholders, "The company given its immediate financing needs has (considered) binding offers that could deliver the requisite funds and allow the Company and its management to focus on its business of operating and running hospitals. As members of the current Board and keeping in mind our fiduciary duties, we think it is imperative that the company does not lose any more time and considers the offers in hand as adequate and substantive."

These four have tried to justify their rationale behind several of their recent decisions, especially the one of accepting only the binding offers for Fortis assets. "The non-binding bids involve considerable uncertainty and merely running a due diligence process does not guarantee a binding bid which the board had wanted in the best interest of the company,'' they tried to reason in their letter to the shareholders. Further, they said, "Given that there are four binding offers for consideration as on date and considering the need for a certain and quick solution for the company, it was considered prudent that only binding bids should be considered." 

The directors felt that it was their decision to consider only binding bids, that some of the non-binding bids were subsequently replaced with binding ones, which only brought in more certainty and commitment of funds by the respective interested parties. In fact, they pointed out that all the bidders who submitted bids had at various points of time engaged with Fortis over the past 18 months, but they had not made any concrete offers. IHH undertook a detailed diligence exercise in mid- 2017 and so did KKR, VPS Healthcare and Bain, amongst others.

Also, in order to ensure 'transparency and independence' in decision-making, the directors said that they formed an independent expert advisory committee (EAC) to advise the board along with their financial advisor. They also appointed the three-member suggested by minority shareholders - Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee. The letter claimed that their decision of considering only binding bids was also supported by the new members.

As such, the four directors indirectly urged the shareholders to not reconstruct the board completely at the moment. In their note, they mentioned that a complete change of the entire board at this time will certainly add more 'turbulence and ambiguity' for the company as well as the management. 

• Justify board decision to consider only binding offers
• Urge shareholers that complete change of board would bring more turbulence and ambiguity for the Co.