Five of the eight directors of the Fortis Board voted in favour of the offer made by the Hero-Burman duo for a stake in the company's hospital and diagnostic chain while three voted for a separate bidder.
"All three directors, who have been around for long and know best about the hospital business, voted in favour of the bid made by the Hero-Burman duo. Of the other five, two voted for Hero-Burman, while the remaining three voted for a different bidder," said Brian Tempest, Director, Board of Directors, Fortis, addressing a press conference on Friday.
Main yardsticks of selection
The decision of the Fortis Board to recommend the Munjal-Dabur duo was based on the bidder emerging as the favourite over the main yardsticks of selection — certainty, liquidity and risk, Tempest added.
The Board’s decision will be placed before shareholders for their approval within the next 30 days. "I am already receiving congratulatory messages from shareholders on the decision taken by the board," Tempest said, exuding confidence about shareholders not going against the decision.
Other bidders
Other suitors in the race whose binding bids were considered by the Board, in its 15-hour marathon meeting on Thursday, included the Manipal-TPG consortium, Malaysia’s IHH Berhad and KKR-backed Radiant Life Care.
Tempest did not divulge the name of the bidders being favoured by the three directors who were opposed to Hero-Munjal. “The decision (to go for the majority decision of recommending Hero-Munjal) is in the best interest of shareholders, stakeholders, patients and employees,” Tempest said.
Deal value
The deal, when implemented, will infuse ₹800 crore via preferential allotment of equity shares at ₹167 per share or as per SEBI ICDR guidelines whichever is higher. Another ₹1,000 crore will be infused through a preferential Issue of warrants at Rs 176 per share or as per SEBI ICDR guidelines whichever is higher, according to an official release circulated late Thursday evening.
“Looking at the immediate liquidity flow that the Munjal-Burman duo sought to bring into the company, we thought it was the best bid. A significant amount of money is expected to flow into Fortis very quickly which is going to help the company stand on its feet,” Tempest said.
Probe into alleged siphoning of cash
Fortis, which is facing multiple probes, had received a major setback earlier this year when the Delhi High court ruled in favour of Japanese pharmaceutical company Daiichi Sankyo and allowed it to collect ₹ 3,500 crore from former promoters Malvinder Singh and Shivinder Singh.
Funds to the tune of ₹473 crore, given by the company’s fully owned subsidiary Fortis Hospitals Ltd as secured short-term investments to group firms of Malvinder Singh and Shivinder Singh, is also under the scanner.
“The forensic audit by Luthra & Luthra is currently on and the report is expected at the end of the month,” Tempest said.
Luthra & Luthra was enlisted by Fortis in March this year to audit and probe the alleged siphoning of cash from the healthcare group.
When asked why the Manipal-TPG consortium was not selected despite its robust offer, Tempest said that it failed to emerge as the favourite across all the selected yardsticks.
EGM on May 22
There is further turbulence in the cards as Fortis is holding an extraordinary general meeting (EGM) on May 22 to vote on a resolution moved by minority shareholders to remove four members from the Fortis Board - Brian W. Tempest, Harpal Singh, Sabina Vaisoha and Lt Gen. Tejinder S. Shergill.
Fortis' minority shareholders East Bridge Capital and Jupiter India Fund in April have called for a vote on the resolution as they feel that the Board failed to exercise its fiduciary duties towards all shareholders and has failed to maintain the expected levels of corporate governance.