Board says demerger and listing may result in value unlocking that may not be optimum for shareholders at this point of time
Fortis Healthcare has put off the amalgamation of its subsidiaries Fortis Malar Hospitals Ltd and SRL Ltd with itself as it is faced with headwinds in the healthcare sector, a disappointing performance of diagnostics business and delay in the composite scheme process.
“The scheme is currently pending for approval with the National Company Law Tribunal (NCLT), Chandigarh Bench. Further, the entire process was expected to take six to eight months, however, due to reasons beyond the company’s control, the process has taken over 19 months and is still not complete,” read a regulatory filing by Fortis Healthcare.
In the last 19 months, the healthcare sector has witnessed strong headwinds and performance of diagnostics (SRL) business has not been optimum. Therefore, Fortis Healthcare’s Board is of the opinion that “the demerger and a subsequent listing may result in value unlocking that may not be optimum for Fortis shareholders at this point in time.” As a result, the composite scheme of arrangement and amalgamation between Fortis Malar Hospitals and SRL has been withdrawn. However, this decision will require requisite approvals from NCLT as the case is pending with the Chandigarh Bench.
The plan of amalgamation and the subsequent listing goes back to August 2016 when the Board had given a nod to demerge its diagnostics business. As per the scheme of arrangement, Fortis Healthcare was to transfer SRL to Fortis Malar Hospitals. The plan was to sell Fortis Malar Hospitals to Fortis Healthcare for Rs 43 crore. At the moment, bidding round is underway to sell its hospital business. The cash-strapped Gurugram-based hospital chain had shortlisted four bids from - Hero Enterprise Investment Office-Burman Family Office, IHH Healthcare Berhad, Radiant Life Care Pvt Ltd backed by KKR Capital and a consortium of Manipal Health Enterprises-TPG Asia.
These four bidders are conducting due diligence so that they can submit their respective bids by June 28. The ongoing bidding process is the fourth round in the last close to two years. The newly comprised Board had set out certain conditions to participate in the bid, which included a minimum investment of Rs 1,500 crore into Fortis Healthcare by way of preferential allotment, plan for funding of RHT Health Trust acquisition, plan for providing exit to private equity investors of SRL, revealing funding source, among others.
According to an industry observer, the decision to delay the amalgamation process may have an impact on the bids (amount) received for Fortis Healthcare.
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