Ranjan Pai of Manipal Hospitals is optimistic that their revised offer for Fortis’ hospital business would find greater acceptance since it addressed three major concerns raised by minority shareholders.

Their concerns were on the deal structure, valuation and the amount of money that was being put into the company, Pai, Chairman of Manipal Education and Medical Group, told BusinessLine , explaining the sweetened deal. “This is our first foray ...into the public market and its important for us to take care of every shareholder and their concerns.”

But the possibility of Fortis being dragged into an ongoing legal tussle between Fortis’ original promoters Malvinder and Shivinder Singh and Japanese drugmaker Daiichi Sankyo was still a major concern. The tussle involved an earlier deal gone sour between the two involving drugmaker Ranbaxy, formerly promoted by the Singh family.

Ups valuation

The revised deal involves the Manipal Group buying 30 per cent stake in SRL, Fortis’ diagnostics business from existing private equity investors. There was a feeling that the full value of the diagnostics business was not being extracted in the earlier structure, Pai said.

“We have upped the valuation by 21 per cent for the hospital business alone,” he said. Fortis’ hospital business is now valued at ₹6,061 crore (₹116 a share). Manipal Hospitals’ valuation remains at ₹6,070 crore. And finally, the planned ₹4,000 crore rights issue after the de-merger to acquire the assets of RHT Health Trust, listed in Singapore, would see greater investor participation.

“Our job right now is to put the best offer and if any of them have any concerns or issues they should reach out and I am happy to talk,” Pai said. “My only concern is that this needs to be done quickly because there is a lot of work to be done and the company should not start going on a downward spiral.”

No role for Fortis

While the courts will decide on the Daiichi legal tangle, he pointed out that the brothers have negligible stake in Fortis after the banks had invoked their pledge. “There’s really no role for Fortis to be part of this ongoing Daiichi – brothers issue.... it should be restricted to that,” he said.

But could Fortis’ hospital assets be part of the brother’s repayment plan if they lose their appeal on the arbitration award of ₹3,500 crore and be forced to pay Daiichi for damages.

With a mere 0.7 per cent stake being heldby Singh brothers, there was no logic in Fortis getting involved in a case between Daiichi and the Singh brothers.

On apprehensions linking the Singh brothers to RHT assets, he said, “We have no reason to believe that it’s owned by the brothers. They have not told us that it’s owned by them....We will make an open tender,” he said.

But with many investigation reports expected on past transactions, Pai said, “If we are in the company, we will cooperate with all the authorities.”

Minority shareholders

“The revised offer has exposed the inefficiency of the board members of Fortis,” said JN Gupta, founder SES, a shareholder advisory service.

“Or the only other thing could be that the Fortis board could have compromised in the deal. Otherwise, how did they ensure that the originally proposed deal value was fair.

“Just as a few investors have come together, the deal value has gone up by nearly ₹1,000 crore. It reflects that the Fortis board was not doing its duty, which is to get the best deal for shareholders.”

“I think, concerns of minority shareholders are being addressed proactively in the Fortis-Manipal merger scheme, which is a very welcome move,” said Anil Singhvi, founder, shareholder advisory firm IiAS.

“I hope such a practice is followed in all deals. Case in point will be IDFC Bank, which is sold very cheap.”

With inputs from Palak Shah

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