IHH offered more strategically and financially compelling preposition along with simplicity and certainty, says Fortis chairman Ravi Rajagopal
New Delhi: The bid by IHH Healthcare Berhad of Malaysia offered more certainty and simplicity, Fortis Healthcare Ltd chairman Ravi Rajagopal said, adding that there is not much risk of IHH pulling out of the deal, even as the company wrestles with probes over financial irregularities.
The search for an investor for cash-strapped hospital chain ended on Friday after weeks of speculation, with the Fortis Healthcare board unanimously accepting the binding offer from IHH to invest ₹ 4,000 crore outbidding TPG-Manipal.
“Compared to the other deals, this was a wise plan that was available. It’s a simple transaction structure. This share price offer is at a 20% premium to the existing market place. The IHH proposal offers a more strategically and financially compelling preposition along with simplicity and certainty," said Rajagopal.
With the company facing a probe by the Serious Fraud Investigation Office (SFIO) and Securities and Exchange Board of India (Sebi) over alleged financial irregularities, Rajagopal made it clear that IHH cannot exit in case the findings are not favourable. “There are no walkaway rights with IHH. They are fully committed to doing this transaction to the extent that there are no walkaway rights that are truly unilateral or discretionary," he said.
The Fortis board will now refer the IHH bid to shareholders for a vote. The transaction is expected to be completed in 60-75 days. “I will be disappointed if surprisingly somebody turns around and says they don’t agree, but I am hoping that we will have full support," said Rajagopal.
Rajagopal said that he does not expect a change in the management structure. “I don’t think this will change the management structure at all. Of course, when IHH comes as a majority investor they may review the talent and try and supplement and augment it but otherwise, as things stand, there is no move to change any of the current structures," he said.
The bidding war for Fortis started in February this year after founders Malvinder and Shivinder Singh lost shareholding because of debt. Also, there were allegations that the promoters diverted funds from the company, a charge that the two, who have since left the company, deny.
The deal and the recovery of inter-corporate deposits (ICDs) are separate matters and there is no provision that has been kept in the deal to take care of the recovery of these ICDs, said Bhavdeep Singh, the chief executive officer (CEO) of Fortis Healthcare.
“The company is trying to collect those funds so there is no connection between this deal announcement and the ICD or any of the other audit findings. They are separate for obvious reasons," Singh said.
Shriram Subramanian, founder and managing director of proxy firm InGovern Research is hopeful of the future. “It may take a year for the company finances to stabilize but the future if it is governed well is positive. The IHH selection brings to an end a sordid saga at Fortis that would have completely destroyed stakeholder value. The final price, at a 20% premium, should be acceptable to investors given that they have had to wait for more than six months since the start of the search and the company is in dire need of funds," he said.
Meanwhile, the erstwhile promoters in a joint statement said, “We are very happy to note the successful completion and selection of IHH as the partner for Fortis. We wish IHH and Fortis the very best in their new partnership. We take pride in being part of the journey to have built two national healthcare icons, Fortis and SRL Diagnostics, with the unflinching dedication of our colleagues and other stakeholders. We are confident that the organization will grow stronger under the new ownership, continuing to deliver world class quality care and always putting patients first."
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