Exclusive | Leading Fortis shareholder against Munjal-Burman’s offer, cites low valuation

A leading institutional shareholder of Fortis Healthcare on Friday said it may vote against the Munjal-Burmans offer if it is tabled before shareholders for approval.

“We are unhappy. Had it been a really good offer, the share price would have shot up,” said a person representing the shareholder, who did not wish to be named.

Shares of Fortis declined 2.66 percent to close at Rs 148.40 on BSE on Friday. The Fortis board on Thursday backed the offer proposed by the Munjal-Burmans for the healthcare chain’s hospital and diagnostics businesses.

Sunil Munjal-led Hero Enterprise and Dabur’s Anand Burman and Mohit Burman have jointly offered to invest Rs 1,800 crore in Fortis Healthcare, of which Rs 800 crore will be through a preferential allotment of equity shares at Rs 167 apiece.

The remaining Rs 1,000 crore will be invested through a preferential issue of warrants, which would give them the right to buy more stake in the future at Rs 176 per share.

“Yes, chances are high that we may vote against the decision,” the above person said.

The shareholder, who is looking for an exit at price of Rs 200 per share, said it’s expecting those who have lost out on Thursday to come out with a counter offer.

“If they make a counter offer with a higher price, the shareholders would prefer that,” the person quoted above said.

Talks are on

The shareholder confirmed that Malaysia’s IHH Healthcare is informally talking to them and another large shareholder, taking their views on putting up a counter offer.

IHH Healthcare on Friday said it is still in race to buy Fortis and is currently evaluating its options, including reaching out directly to shareholders with a possible hostile bid.

Tan See Leng, Managing Director and Chief Executive Officer of IHH expressed disappointment over Fortis board decision to back Munjal-Burmans offer.

“We remain committed and are currently evaluating our options. We are open to further discussions with all stakeholders, and look forward to the support of Fortis shareholders,” Leng said.

The statements of the Fortis leading shareholder and IHH Healthcare indicate that it’s not a done deal for Munjal-Burmans despite getting the backing of the majority members of the healthcare provider board.

The shareholders

Yes Bank became Fortis’ largest shareholder with 15 percent stake after it invoked the shares pledged by Malvinder Singh and Shivinder Singh, the erstwhile promoters of Fortis, who now own around 0.77 percent stake in the company. East Bridge Capital along with Jupiter India Fund have around 12 percent stake.

Axis Bank, Blackrock, Morgan Stanley, and ICICI Prudential are the other large institutional investors who have a stake in the company.

Market investors Radhakishan Damani and Rakesh Jhunjhunwala together hold around 1.5 percent stake in Fortis. Damani had picked up 0.5 percent stake in the company in February.

East Bridge Capital along with Jupiter India Fund in April called for convening an EGM to remove four members on the Fortis Board – Brian W. Tempest, Harpal Singh, Sabina Vaisoha and Lt Gen. Tejinder S. Shergill on grounds that the board failed to exercise its fiduciary duties towards all shareholders and has failed to maintain expected levels of corporate governance.

Fortis will be holding EGM to vote on resolution moved by minority shareholders on May 22. The shareholder expressed dismay over people related to erstwhile promoters continuing on the board.

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