Fortis takeover, Act II: Board chalks out the next steps for final bidding

Now that the reconstituted board has reopened the bidding process for Fortis Healthcare, anyone can take the floor

The Munjal-Burman combine, the investor recommended by the erstwhile board for taking over Fortis Healthcare India Ltd (FHIL), on Monday wrote to the Fortis management to break the gridlock and consider all binding bids made to the board. These include those by IHH Berhad and Manipal-TPG.

 
Three Fortis board members – Harpal Singh, Sabina Vaisova and Tejinder Singh Shergill – had resigned last week, two days before the extraordinary general meeting called on May 22 by minority shareholders. Brian Tempest, the only remaining board member, was removed.
 
Four new board members – Rohit Bhasin, Suvalakshi Chakraborty, Ravi Rajagopal and Indrajit Banerjee –previously taken as independent directors, were inducted on a joint representation by East Bridge capital Masters and National Westminister Partners representatives of the Jupiter India Fund.
 
The expert advisory committee which was constituted earlier with Deepak Kapoor, former chairman of the board and chief executive of PwC India, and Lalit Bhasin, President of the Society of Indian Law firms and managing partner of Bhasin and Co, seems to have no specific role according to Fortis’ Securities Exchange SEC filing, made on Tuesday.
 
The financial advisors are representatives of Standard Chartered Bank and Arpwood Capital, and legal advice is given by Cyril Amarchand Mangaldas and Vaish associates. 
 
Given that the matter has dragged on, the board has decided to put in strict timelines for the bidding process. The three bidders, Munjal Burman Consortium, TPG-Manipal, and IHH Healthcare Berhad have been invited by the board to participate in the process by May 31.
 
In addition, any other party, interested in joining the bidding process is invited to offer an expression of Interest (EoI) by May 31, 2018. The EoI will be considered after evaluating their financing capability, ability to consummate the transaction, and approvals required. Effectively, Fosun and Radiant, which made non-binding offers, can also throw in their hat in the ring now.
 
The board will inform the bidders by June 1 about the acceptance of the bids. They will be given 10 days to conduct due diligence and interviews, including all financial and legal information cited in the letter.
 
Key contents of the binding bid to be submitted by evening 14th June, 2018
 

• Minimum investment of INR 1500 crores in FHL by preferential allotments

• Plan for funding RHT health Trust acquisition, stop date 30 September.

• Plan for exit of PE investors in SRL

• Bids to be unconditional subject to regulatory approvals

• Bids to include source of funds to finanace the transactions

• Plans to retain current management and employees

Thanks to shareholder activism, an asset driven to the ground in the past year now seems to be gaining some ground. Once the Singh brothers resigned from the board, the shadow of Daiichi moved away from the beleaguered hospital, struggling to meet operating capital. When the board decides to recommend an offer, shareholders will vote on it.
 
IHH Berhad, which has been biding its time since last year, started with a non-binding offer that changed to a binding one, and sent a revised offer by May 9. It is currently waiting for the board to reconsider it.
 
Manipal-TPG, which had triggered an action since its deal was made public on March 27, probably did not foresee the turmoil it would have to face. It also gave a revised offer on May 23.