This article first appeared in The Edge Financial Daily on November 19, 2019
KUALA LUMPUR: IHH Healthcare Bhd said yesterday it had never dealt with nor colluded with Fortis Healthcare Ltd founders Malvinder Mohan Singh and Shivinder Mohan Singh, or any entities related to them, in relation to IHH’s subscription to a 31.1% stake in Fortis.
In a statement to Bursa Malaysia yesterday, IHH said its subscription to the stake — comprising 235.29 million new shares in Fortis at 10 rupees (58 sen) each via Northern TK Venture Pte Ltd (NTK) — was undertaken and completed through a process run by the reconstituted Fortis board after Malvinder and Shivinder were no longer in control of Fortis.
“The [IHH] board wishes to clarify that the 31.1% of the expanded voting share capital of Fortis held by IHH through NTK was acquired by NTK through the subscription (through preferential allotment and not a purchase or transfer of existing shares in Fortis), which was completed on Nov 13, 2018. The board also wishes to inform that the subscription was undertaken in a fair and transparent manner, after obtaining the requisite corporate and regulatory approvals and in accordance with all applicable laws,” IHH said.
The statement came after the Supreme Court of India last Friday directed Fortis and the Supreme Court registry to register a fresh contempt petition in regard to the violation of a court order dated Dec 14, 2018, which was to maintain the status quo of the deal with IHH.
Japanese drugmaker Daiichi Sankyo Co Ltd argued that certain transactions between IHH and Fortis had violated the court’s directions. Daiichi Sankyo contested the deal as part of its efforts to recover US$500 million (RM2.08 billion) from Malvinder and Shivinder.
In last Friday’s judgement, the court held Fortis’ founders — Malvinder and Shivinder — guilty of contempt of court and said it could start similar proceedings against Fortis.
In yesterday’s statement, IHH said Fortis is evaluating the judgement and seeking appropriate legal advice on the matter.
But in light of the judgement, IHH said NTK’s open offer for Fortis as well as Fortis Malar Hospitals Ltd will not proceed for the time being, adding that the Fortis open offer involves the acquisition of up to an additional 26% stake in Fortis, which would push IHH’s stake in the company to above 50%.
“IHH remains committed to proceeding with the Fortis open offer once the stay is lifted by the Supreme Court of India. The next hearing date for this matter is Feb 3, 2020. IHH is seeking appropriate legal advice on this matter and will subsequently decide on the future course of action,” IHH said.
Meanwhile, The Economic Times reported yesterday that IHH is facilitating the planned sale of up to a 44% stake in SRL Ltd, Fortis’ diagnostics arm.
The publication said private equity firms, TA Associates, Warburg Pincus and ChrysCapital, have been shortlisted from a group of five suitors to acquire up to 44% stake in SRL, which is currently owned by several shareholders in various portions.
“The three shortlisted bidders have proposed offers that peg the valuation of SRL between 3,700-4,200 crore (ten million) rupees, people aware of the matter said. Fortis owns about 56% in its diagnostics arm. Incoming investors will have to fork out at least 1,750 crore rupees or US$250 million (RM1.04 billion), but the final deal size will depend on how much stake they eventually acquire.
“Shortlisted bidders held management meetings with the Fortis leadership and representatives from Malaysia’s IHH Healthcare in the first week of November, sources said. They were asked to revise their financial offers,” the publication wrote.
Again citing sources, the report said IHH has a preference for an investor who will play a passive role. Some of the suitors have asked for rights to replace key management personnel at SRL, though this could become a stumbling block in the deal as IHH is said to be averse to this, it added.
IHH shares closed 21 sen or 3.93% higher at RM5.56 yesterday, giving it a market capitalisation of RM48.78 billion.