ET Intelligence Group : Manipal Groups revised offer for Fortis Healthcare has failed to impress shareholders once again. Observers are now questioning the boards role in obtaining a fair value for minority shareholders of the company, in which the promoters now hold less than 1 per cent compared with 34 per cent in December 2017.
“The new offer exposes the failure of the board in discharging its duty of maximising shareholder value. The board had (earlier) arrived at a value through independent valuation, fairness opinion and recommendation of Audit and Risk Committees and if the offer suddenly increases by more than Rs 1,000 crore or 21 per cent, it reflects that the Board did not have any idea about the companys valuation. It is either incompetent or siding with the bidder. There may also be a larger governance issue at Fortis keeping in mind past instances,” said JN Gupta of Stakeholders Empowerment Services, a Mumbai based corporate governance research and advisory firm.
The revised offer assigns nearly 20 per cent more value to the hospital business. However, the valuation is still at a steep discount of 40 per cent to peers such as Apollo Hospitals and Narayana Hrudayalaya. The previous offer floated on March 28 was at a discount of 50 per cent to the peers. According to analysts, the current valuation works out to be Rs 1.2 crore per bed compared with the peer valuation of Rs 2 crore on an average. The new offer also plans to eventually list the diagnosis business under SRL unlike in the earlier offer where it was going to be a subsidiary.
Ace investor Rakesh Jhunjhunwala who along with his associates owns shares of Fortis, too, had questioned the authority of the board, which was formed by the previous promoters. “What is the sanctity of a deal approved by a board of directors appointed by a group of shareholders who are no longer shareholders of the company,” he told ET last week. The hospital chain should be sold through a “fair” process where all the interested parties are allowed to bid, he said.
The promoter holding of Shivinder Singh and his family has declined to a negligible level after the financial lenders invoked the pledged shares. This resulted in 99 per cent of the company shares with the minority shareholders. It has raised concerns whether Manipal Group backed by the US based private equity investor TPG is trying to satisfy the interests of financial creditors at the expense of minority shareholders.
“Creditors hold significant shares of the company now and their interest mainly would be to recover the loan amount and not in identifying the real value for investors. These institutions can influence the deal,” said a minority shareholder on the request of anonymity. Yes Bank and Edelweiss are the leading financial creditors who invoked the pledged shares of promoters.
The dismay among investors about the revised bid was visible in Fortis Healthcares stock movement on Wednesday. The stock which made an intraday low of Rs 144.5 gained after media reports that IHH, a Malaysian hospital chain, would make a counter offer. It closed 0.8 per cent higher at Rs 147.6.