Proxy adviser slams Fortis Healthcare board for rebuffing competing offers

A proxy advisory firm has slammed a move by the board of Fortis to rebuff several bids as a takeover battle for India’s second-largest hospital chain ramps up. The fact Fortis has received five competing offers shows its assets have potential, according to Amit Tandon, a managing director at Institutional Investor Advisory Services. Directors of Fortis shouldn’t exclude any suitors from the process and should try to work with companies that have put in non-binding bids, Tandon said.

Fortis, which has a market value of $1.2 billion, is slate to decide next week between binding offers from a TPG-backed consortium and a joint bid from two Indian business families.

It’s also received three non-binding proposals backed by well-heeled investors from KKR & Co. to Chinese billionaire GuoGuangchang, which could offer investors a higher price. Thosebids are conditional on getting time for due diligence, arequest Fortis’s board has rejected.

 “The board needs a revamp,” Tandon said by phone. “The existing directors have been associated with the company too long. It doesn’t give you a sense of comfort.”

    

A spokesman for Fortis did not immediately respond to requests for comment.

The hospital operator formed an expert panel to evaluate the proposals and make a final recommendation by April 26, when the board will make a decision, Fortis said Thursday.

Two shareholders, East Bridge Capital Master Fund and Jupiter India Fund, which own a combined 12.04 percent ofFortis, have sent a notice to the hospital operator seekingremoval of the existing board members and appointing new independent directors, Fortis said this week.

     

The fight over Fortis kicked off after the shareholding of its founders, Malvinder and Shivinder Singh, slid to less than 1

percent as lenders seized stock they’d put up as collateral.

     

The brothers had resigned from the board in February, a day before Bloomberg News reported they had taken at least 5 billion rupees ($76 million) out without board approval. India’s fraud watchdog and market regulator have since started investigations into the financial irregularities at the company.

     

“The move to consider only binding offers seems to be a reluctance of the board to allow any due diligence,” said Shriram Subramanian, founder and managing director of another proxy firm InGovern Research Services Pvt.