Battle for Fortis not over yet as shareholders plan counter move

NEWDELHI:Hedge fund East Bridge Capital and Jupiter India Funds’ move to remove four Fortis Healthcare Ltd directors have drawn support from large shareholders, three people directly aware of the development said.

The disgruntled shareholders, which includes funds representing close to 30% of Fortis shareholding, are expected to vote along with Eastbridge in the forthcoming extraordinary general body meeting scheduled to be held on May 22 to decide the fate of directors Brian Tempest, Harpal Singh, Sabina Vaisoha and Tejinder Singh Shergill, according to the people cited above, requesting anonymity.

Under current rules, investors with 10% or more stake can call for a special meeting of shareholders. “Foreign funds that hold large stakes in Fortis include Blackrock, York Capital and Elliott Management apart from Eastbridge,” said one of the three people cited above.

Emails sent to Blackrock, York Capital, Elliott management did not elicit a response until press time. Mint was the first to report on April 2 on Eastbridge’s plans to block a previously announced sale of Fortis hospitals to the Manipal Health Enterprises-TPG Capital over valuation concerns.

On May 10, the Fortis board approved a binding offer from Sunil Munjal’s Hero Enterprise and Dabur chairman Anand Burman’s family office to sell close to 16% in Fortis for ₹1,800 crore .

“These shareholders are unhappy with the board’s decision to accept the Munjal-Burman offer,” said the second person . They (investors) plan to call for fresh bids for the hospital chain if the board members are replaced, the person said.

The transaction, if approved by shareholders, will not trigger an open offer because the proposed stake sale is less than the minimum 26% threshold under the takeover laws that is needed to trigger an open offer potentially giving an exit opportunity to shareholders.

Fortis’s other bidders include the TPG-Manipal combine and IHH Healthcare. They have offered ₹160 per share and ₹175, respectively. Both TPG-Manipal and IHH have since said they were disappointed with the board’s decision and have sought support from shareholders without disclosing their strategy.