Fortis board opts for Munjal-Burman offer
TPG-Manipal no longer interested in SRL Diagnostics
The takeover saga at Fortis Healthcare, one of India’s leading healthcare chains, reached the culmination on Thursday, with the board choosing the Hero Enterprises-Burman Family Office offer as the best for the hospital and diagnostic chain.
“The Board, post having detailed discussions on the pros and cons of each offer, decided by majority, to recommend the offer of Hero Enterprise Investment Office-Burman Family Office (the last offer made on May 1, 2018)," Fortis Healthcare said in a statement to the BSE on Wednesday.
Sunil Munjal, chairman of Hero Enterprises, along with Dabur's Anand and Mohit Burman, had sweetened their offer for Fortis on May 1.
The recommendation of the board will now be placed before the shareholders for their approval.
“We are delighted that the board has accepted our offer, which is, unarguably, the best solution. We are sure that shareholders will see the intrinsic value in our proposal and repose confidence in us. As longterm investors, we are committed to help make Fortis the finest healthcare institution in the region, and create value for all stakeholders,” Munjal said.
Anand Burman said: "Fortis is a national healthcare asset, which has a good spread across the country and we hope to help the company become what it ought to be. Going forward, the immediate plan of action for the company should be to build on its strengths, retain talent, expand business, and institutionalise processes at Fortis.”
Sources indicate that the board was divided among newly appointed independent directors and the old ones, and that the decision was not a unanimous one. “There were long deliberations over the matter and the recommendations suggested by the expert advisory committee. It was not a unanimous decision, the board was split," said a person close to the development.
When asked about the Fortis board's decision, Ranjan Pai, managing director and chief executive officer of Manipal Health Enterprises Pvt Ltd, said he was disappointed. "The board obviously felt this was in the best interests of the shareholders. However, this offer does not have any long-term vision for Fortis Healthcare," he said. Pai also added that TPGManipal would not be interested in acquiring SRL Diagnostics alone if Munjal-Burman-backed Fortis Healthcare divests it. "We see value in Fortis Hospitals and SRL Diagnostics together. We are not interested in buying SRL Diagnostics alone," he added.
"Our offer is the fastest. We anticipate it will take 45-60 days while the other offers will take longer to implement. Moreover, our bid is unconditional and does not include any walk-away clauses unlike the others,” Sunil Munjal had said earlier this week.
In the latest round, the MunjalBurmans have offered to invest ~18 billion in Fortis Healthcare through a combination of preferential equity and warrants. Their offer values Fortis at over ~90 billion, or around ~172 per share. The duo have proposed an upfront infusion of ~10.5 billion directly into Fortis. The remaining ~7.5 bn will be infused into the company over the next four months. They have also sought three seats on the Fortis board. Besides, they have also proposed a strategic sale of SRL Diagnostics after divesting Fortis Healthcare’s stake in it.
According to a recent Edelweiss report, SRL has grown at a 14 per cent compounded annual rate during 2011-12 to 2015-16, while its Ebitda margins improved from 10 per cent to 20 per cent during the period.
Earlier this week, Brain W Tempest, Harpal Singh, Sabina Vaisoha and Lt General Tejinder S Shergill, the four directors on the Fortis board, had in an open letter to the shareholders urged 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 extra ordinary general meeting on May 22 to vote on the resolution of the removal of these directors.
Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee, three new directors, were appointed recently as proposed by the minority shareholders.
Bidding for Fortis closed on May 1. Apart from the Hero-Munjal duo, the Fortis board was considering offers from TPG-Manipal, KKRRadiant Life Care and IHH Healthcare Bhd. Financial advisors Standard Chartered Bank and Arpwood Capital and legal advisors Cyril Amarchand Mangaldas were appointed by the Board to advise on the matter.