Supreme Court orders status quo on Fortis-IHH deal2 min read . Updated: 15 Dec 2018, 12:05 AM IST
Fortis Healthcare tells NSE is was not a party to the judicial proceedings initiated by Daiichi Sankyo
Mumbai: The Supreme Court on Friday put on hold one of India’s biggest healthcare deals, ordering a “status quo" on the sale of Fortis Healthcare Ltd to IHH Healthcare Berhad, Asia’s largest private healthcare group. “Status quo with regard to sale of the controlling stake in Fortis Healthcare to Malaysian IHH Healthcare Berhad," the order read, putting a cloud of uncertainty over the ortis open offer that was to commence on 18 December and close on 1 January 2019.
A three-judge bench headed by Chief Justice Ranjan Gogoi was hearing a petition by Japanese drugmaker Daiichi Sankyo, which has accused former promoters the Singh brothers—Malvinder and Shivinder—of violating court orders. Daiichi had moved a plea against the Singh brothers and Indiabulls alleging they had created fresh encumbrances for around 1.7 million of the total 2.3 million of Fortis shares despite the apex court forbidding it.
The court order of 15 February allowed banks and financial institutions to sell Fortis shares pledged with them on or before 31 August by the Singh brothers. The Supreme Court had, at the time, clarified that there could be no fresh encumbrances created by the promoters and others, directing maintenance of status quo. But Daichii Sankyo claimed in its petition that Indiabulls and Singh brothers had created fresh encumbrances.
People aware of the matter said that Fortis and IHH are likely to challenge the order. “While the court has not quashed the transaction and it has asked to stop where you are, the IHH has put some money by now. They may challenge the order," said two people aware of the matter.
“It is unfortunate that the company and the new promoters and its minority shareholders suffer for the misdeeds of the erstwhile promoters. However, it is unclear as to what would be the status of the open offer process underway. IHH should seek immediate relief," said Shriram Subramanian, founder and managing director of proxy firm InGovern Research.
While IHH Healthcare did not respond immediately to the development, it seems that the SC’s order caught Fortis unawares. In fact, the day IHH took over, in an interaction on 14 November, its chairman Ravi Rajagopal had said the “message we have been sending to Daiichi is that we are on your side."
Rajagopal, along with other members of the newly constituted board, was mandated to evaluate offers for cash-strapped Fortis and is working with the management to bring it back on a growth trajectory.
Both Fortis and IHH did not react on the court’s order till late in the evening. However, both were learnt to be discussing the court order with their lawyers and the next course of action, the people cited above said.
“The company was not party to these judicial proceedings. We are awaiting the receipt of their order and upon consideration of the same we shall respond appropriately in accordance with applicable law," Fortis informed the National stock Exchange stock Ltd.
Shares of Fortis Healthcare Ltd on Friday fell as much as 14.3%, its biggest single day fall in eight months, as the news hit the Street. The scrip closed 6.75% lower at ₹ 141.65 apiece on the BSE while the benchmark Sensex ended flat at 35,962.93 points.
After a long bidding war, a binding offer by IHH HealtHcare Berhad to invest ₹ 4,000 crore in the cash-strapped hospital chain, outbidding a consortium of Manipal Health Enterprises and TPG Capital, was unanimously accepted in July.
Soon after IHH Healthcare won the bid, Daiichi Sankyo approached the Delhi high court to block the $1 billion sale of Fortis to IHH.