The extraordinary general meeting (EGM) of Fortis shareholders called on February 22 will be a dud affair since the meeting was called to eject four directors from the board of the company, three of whom have already resigned. East Bridge Capital and National Westminster Bank which hold 12.04 per cent of the company’s equity had requisitioned the EGM to remove 4 directors — Brian Tempest, Lt Gen Tejinder S Shergill, Harpal Singh and Sabina Vaisoha.
The EGM will also not discuss the most critical issue of which of the four bids for Fortis to accept because that’s not in the agenda of the meeting. Instead, it will only approve the appointment of the three new directors-Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee.
Fortis’ largest shareholder, Yes Bank, has asked the board to consider all the bids (binding as well as non-binding) despite the board recommending the Munjal-Burman offer. However, that’s not on the EGM agenda. It will need to be decided by the new board. The newly constituted board’s meeting is expected after the EGM on Tuesday. Another shareholders’ meeting will need to be called to approve whichever bid the new board recommends.
Lt Gen Tejinder S Shergill, Harpal Singh and Sabina Vaisoha tendered their resignations a day before the board meeting at the Air Force Auditorium in New Delhi on Tuesday. The fourth Brian Tempest is the chairman of the board and will continue for now. Industry observers believe shareholders may not insist on Tempest’s ejection since he’s considered a professional.
While Shergill said he was resigning as there were sufficient members on the board, both Harpal Singh and Vaisoha said they were resigning due to shareholders’ disapproval to their continuation on the board.
These four board members had submitted an open letter earlier this month explaining their decisions and justifying them asking shareholders to take an informed call during the May 22 EGM. They were all appointed by promoters Malvinder Singh and Shivinder Singh. While Harpal Singh is Malvinder’s father-in-law; Tempest is former CEO of Ranbaxy Laboratories, the company that was sold to Japan’s Daiichi Sankyo in 2008; Shergill is a member of the board of other group companies and Vaisoha is a Singh family friend.
However, since the Singh family had lost control of the shareholding of the company once bankers invoked their shares pledged against the loans taken, shareholders have been demanding reconstitution of the board of directors.
On May 14, Manipal-TPG revised their offer for Fortis to Rs 180 per share from its earlier offer of Rs 160 apiece, which is 8 per cent higher than the current winner Munjal-Burman combine. This would require investing Rs 2,100 crore into Fortis as against Munjal-Burman’s proposal of Rs 1,800 crore.
On May 17, IHH sent a letter to the Fortis board that it is “strongly committed” to participate in the bid for Fortis and keen to understand what the board planned to do in wake of Manipal-TPG’s revised offer. “If there is indeed a new bid process that the Board is proposing to initiate, we would like to participate in such a process and request that we be kept informed of any developments regarding the same,” said IHH Healthcare MD and CEO Tan See Leng, adding that the company has extended the acceptance period of its “enhanced revised” bid to May 29. IHH will invest Rs 650 crore into Fortis right away at Rs 175 per share, followed by another Rs 3,350 crore after a week’s due diligence.
Earlier, the board of Fortis had recommended the bid formed by a consortium of Sunil Kant Munjal of Hero Enterprises and the Burman family of the Dabur group. They proposed immediate equity infusion of Rs 800 crore in Fortis at Rs 167 per share through a preferential allotment, besides another Rs 1,000 crore through a preferential issue of warrants at Rs 176 apiece.
The fourth bid is from KKR- backed Radiant Life Care at Rs 165 per share. Radiant Life Care Pvt. Ltd, a hospital chain backed by private equity major Kohlberg Kravis Roberts & Co., or KKR, also raised the pitch after entering the race for the hospital chain with a binding proposal to buy Fortis Mulund for Rs 1,200 crore without any due diligence. The move, it said, would provide immediate liquidity of Rs 680 crore to Fortis. Radiant plans to demerge Fortis’ hospital business and buy a 26% stake in the new entity, which will exclude SRL.