Another twist in Fortis sale? Yes Bank tells board to consider all offers
Yes Bank has urged the board to not only consider revised bids received from competitors subsequently, but also consider inviting other interested companies that did not submit or revise their bids.
- May 21, 2018,
- Updated May 21, 2018 1:21 PM IST
Fortis Healthcare (FHL) has had a dream run of late, playing the belle of the ball and receiving multiple revised offers from its many suitors. And apparently the stakeholders of India's second-largest private hospital chain just don't want the party to end, neither do the rejected suitors.
Several days after the Fortis board "decided by majority to recommend the binding offer of the Munjal and Burman consortium", as they declared in a regulatory filing on May 10, the company's single-largest shareholder is reportedly having second thoughts. According to The Economic Times, Yes Bank has urged the board to not only consider revised bids received from competitors subsequently, but also consider inviting other interested companies that did not submit or revise their bids.
Significantly, sources told the daily that Yes Bank made the above requests through its law firm Shardul Amarchand Mangaldas, which changes the tone of the communication altogether. Yes Bank had reportedly written at least two letters earlier, but those were generic, direct correspondence with Fortis board requesting them to be transparent and fair.
The first letter sent by the law firm on behalf of Yes Bank urged FHL's board to review and consider the revised Manipal-TPG bid on merit and "not to take any hasty assessment but carefully review and assess each bid". The report added that the second letter asked the board to reconsider IHH Healthcare Berhad's deadline extension for its revised bid as well as throw open the process once again after doing away with its binding-bids-only criteria. If it has its way, then even the bid previously submitted by China's Fosun will be back in the reckoning.
To remind you, on May 14 Manipal-TPG revised their offer to Rs 180 per share from its earlier offer of Rs 160 apiece, which is 8 per cent higher than the current winner Munjal-Burman combine. This entails investing Rs 2,100 crore into Fortis as against Munjal-Burman's proposal of Rs 1,800 crore. The letter to the FHL board proposing the "Modified New Offer" added that unlike their offer, the Munjal-Burman offer "only partially" solves the short term liquidity concerns of FHL and hence fails to deliver long term benefits facing the company.
Not to be outdone, on May 17, IHH dashed off a letter to the FHL borad saying that it is "strongly committed" to participate in the bid for Fortis and keen to understand what the board planned to do in wake of Manipal-TPG's revised offer. "If there is indeed a new bid process that the Board is proposing to initiate, we would like to participate in such a process and request that we be kept informed of any developments regarding the same," said IHH Healthcare MD and CEO Tan See Leng, adding that the company has extended the acceptance period of its "enhanced revised" bid to May 29.
The Malaysian healthcare major has proposed to invest Rs 650 crore into FHL right away at Rs 175 per share, followed by another Rs 3,350 crore after a week's worth of due diligence. It will take up about 30 per cent stake in FHL and will have to talk to minority investors for another 26 per cent under the change-of-control open offer. All of this is expected to take IHH's total investment to Rs 7,400 crore for 56 per cent stake in the cash-strapped healthcare firm.
Incidentally, Yes Bank is not the only stakeholder unhappy with the FHL board choice, i.e. the Munjal-Burman offer. Earlier, media reports suggested that five of the eight members of the board who voted for same not only went against the recommendations of financial advisers Arpwood Capital and Standard Chartered Bank but also that of legal adviser Cyril Amarchand Mangaldas. Reportedly, older board members brought in by the former promoters, the Singh brothers, supported the bid while three recently inducted independent members had voted for either IHH or Manipal-TPG.
What's more, four of the older board members are under a cloud currently as their removal has been sought by two institutional investors at an extraordinary general meeting to be held on May 22. National Westminster Bank Plc as trustee of Jupiter India Fund and East Bridge Capital Master Fund, which together hold a 12.04 per cent stake in FHL, had accused these directors of failing to maintain corporate governance and fairly represent interests of all shareholders. Three of them - Harpal Singh, Lt. Gen. Tejinder Singh Shergill and Sabina Vaisoha - tendered their resignation on Sunday as per regulatory filings. That leaves company director Brian W Tempest, who chaired the crucial board meeting where the Munjal-Burman bid was picked, and who was the MD of Ranbaxy under the Singh brothers.
The EGM tomorrow will play a decisive role in FHL's direction here on. Stay tuned.
Fortis Healthcare (FHL) has had a dream run of late, playing the belle of the ball and receiving multiple revised offers from its many suitors. And apparently the stakeholders of India's second-largest private hospital chain just don't want the party to end, neither do the rejected suitors.
Several days after the Fortis board "decided by majority to recommend the binding offer of the Munjal and Burman consortium", as they declared in a regulatory filing on May 10, the company's single-largest shareholder is reportedly having second thoughts. According to The Economic Times, Yes Bank has urged the board to not only consider revised bids received from competitors subsequently, but also consider inviting other interested companies that did not submit or revise their bids.
Significantly, sources told the daily that Yes Bank made the above requests through its law firm Shardul Amarchand Mangaldas, which changes the tone of the communication altogether. Yes Bank had reportedly written at least two letters earlier, but those were generic, direct correspondence with Fortis board requesting them to be transparent and fair.
The first letter sent by the law firm on behalf of Yes Bank urged FHL's board to review and consider the revised Manipal-TPG bid on merit and "not to take any hasty assessment but carefully review and assess each bid". The report added that the second letter asked the board to reconsider IHH Healthcare Berhad's deadline extension for its revised bid as well as throw open the process once again after doing away with its binding-bids-only criteria. If it has its way, then even the bid previously submitted by China's Fosun will be back in the reckoning.
To remind you, on May 14 Manipal-TPG revised their offer to Rs 180 per share from its earlier offer of Rs 160 apiece, which is 8 per cent higher than the current winner Munjal-Burman combine. This entails investing Rs 2,100 crore into Fortis as against Munjal-Burman's proposal of Rs 1,800 crore. The letter to the FHL board proposing the "Modified New Offer" added that unlike their offer, the Munjal-Burman offer "only partially" solves the short term liquidity concerns of FHL and hence fails to deliver long term benefits facing the company.
Not to be outdone, on May 17, IHH dashed off a letter to the FHL borad saying that it is "strongly committed" to participate in the bid for Fortis and keen to understand what the board planned to do in wake of Manipal-TPG's revised offer. "If there is indeed a new bid process that the Board is proposing to initiate, we would like to participate in such a process and request that we be kept informed of any developments regarding the same," said IHH Healthcare MD and CEO Tan See Leng, adding that the company has extended the acceptance period of its "enhanced revised" bid to May 29.
The Malaysian healthcare major has proposed to invest Rs 650 crore into FHL right away at Rs 175 per share, followed by another Rs 3,350 crore after a week's worth of due diligence. It will take up about 30 per cent stake in FHL and will have to talk to minority investors for another 26 per cent under the change-of-control open offer. All of this is expected to take IHH's total investment to Rs 7,400 crore for 56 per cent stake in the cash-strapped healthcare firm.
Incidentally, Yes Bank is not the only stakeholder unhappy with the FHL board choice, i.e. the Munjal-Burman offer. Earlier, media reports suggested that five of the eight members of the board who voted for same not only went against the recommendations of financial advisers Arpwood Capital and Standard Chartered Bank but also that of legal adviser Cyril Amarchand Mangaldas. Reportedly, older board members brought in by the former promoters, the Singh brothers, supported the bid while three recently inducted independent members had voted for either IHH or Manipal-TPG.
What's more, four of the older board members are under a cloud currently as their removal has been sought by two institutional investors at an extraordinary general meeting to be held on May 22. National Westminster Bank Plc as trustee of Jupiter India Fund and East Bridge Capital Master Fund, which together hold a 12.04 per cent stake in FHL, had accused these directors of failing to maintain corporate governance and fairly represent interests of all shareholders. Three of them - Harpal Singh, Lt. Gen. Tejinder Singh Shergill and Sabina Vaisoha - tendered their resignation on Sunday as per regulatory filings. That leaves company director Brian W Tempest, who chaired the crucial board meeting where the Munjal-Burman bid was picked, and who was the MD of Ranbaxy under the Singh brothers.
The EGM tomorrow will play a decisive role in FHL's direction here on. Stay tuned.