After 7 years, IHH finally gets Sebi go-ahead for Fortis open offer

In 2018, price was set at ₹170/share; Fortis Healthcare now trades at ₹980.10

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Malaysian giant IHH Healthcare on Friday said it had secured approval from the Securities and Exchange Board of India (Sebi) to proceed with its mandatory open offer to acquire a 26 per cent stake each in Fortis Healthcare and Malar Hospitals.

 

The open offer price for Fortis Healthcare was initially set at ₹170 a share in 2018. But regulatory delays and court proceedings stalled the process. On that basis, the deal size would be about ₹3,349 crore.

 

Since then, Fortis Healthcare shares have surged, closing at ₹980.10 apiece on the BSE on Friday, raising the possibility that IHH may have to revise the offer price upward.

 

Considering Friday’s closing price, IHH Healthcare, through its subsidiary Northern TK Venture (NTK), will acquire 235.29 million shares of Fortis Healthcare at ₹23,068 crore via preferential allotment. This would in turn trigger a mandatory open offer for up to 197 million additional shares, worth ₹19,316 crore, representing 26.1 per cent of Fortis’ expanded voting share capital.

 

IHH must also launch an open offer for up to 4.9 million shares of Fortis Malar Hospitals, valued at ₹32 crore at ₹64.85 per share, equivalent to 26.11 per cent of Malar’s voting share capital.

 

An email sent to Fortis Healthcare remained unanswered at press time.

 

The Sebi approval comes nearly seven years after the offer was first proposed.

 

IHH acquired a 31 per cent stake in Fortis through NTK in November 2018, but suspended the open offer for an additional 26 per cent after Japanese drugmaker Daiichi Sankyo filed a contempt plea against Fortis founders Malvinder and Shivinder Singh. The deal was held up in court amid Daiichi Sankyo’s long-running dispute with the Singh brothers over its purchase of Ranbaxy Laboratories more than a decade ago.

 

In May this year, NTK sought damages of JPY 200 billion (about ₹11,800 crore or $1.38 billion at the time) from Daiichi Sankyo in a Tokyo court, alleging that the Japanese group caused losses by preventing it from completing the Fortis open offer.

 

NTK argued that although IHH was declared the successful bidder in the Fortis process and received a preferential allotment of shares, triggering the open offer, Daiichi had obstructed the transaction. 

 

“While NTK attempted to execute the open offer, Daiichi Sankyo unfairly obstructed the execution and prevented completion of the acquisition, resulting in significant losses to NTK,” IHH and NTK said in a joint statement.

 

The announcement came after market hours. Fortis Healthcare shares ended down 0.95 per cent in Friday’s trade.