Fortis Healthcare sets rules for fresh bidding, now allows due diligence

The newly constituted Board of Fortis Healthcare has not just announced a fresh round of bidding, but also permitted the potential suitors to conduct due diligence which the earlier directors had disallowed it. Hence, the data room will now be opened for the bidders, which they have been demanding in the past few months.

The board has set certain conditions for participants in the latest round of binding bids. These conditions include minimum investment of Rs 1,500 crore into Fortis Healthcare through preferential allotment, a plan to fund RHT Health Trust's acquisition and plan to provide exit for private equity investors of SRL. Besides this, suitors should also make unconditional bids and reveal funding source for the offer alongwith a plan to retain the current management as well as employees.

Those not adhering to the conditions may not be short listed for further process.

As per the multiple step process laid out by the Fortis Healthcare Board, non-disclosure agreement would be signed with the short listed bidders on June 1, who will get access to the data room for due diligence purposes. The due diligence will be allowed upto June 10, and the final submission of binding offers will happen on June 14.

"The previous round of bid involved inviting offers of any permutation and combination, that is why we saw Hero Enterprise Investment Office-Burman Family Office investing Rs 1,800 crore for three seats in the Board. The offers from others were way different. At least now, everyone will have to toe a certain line for the benefit of all the stakeholders including the employees," added the expert.

The fresh decision comes after the Board on Tuesday decided to initiate a fresh bidding process. According to the 'Invitation for Transaction Participation', "the Board has decided to invite three of the bidders namely Munjal-Burman Consortium, TPG-Manipal Consortium, and IHH Healthcare Berhad to participate in the Process...no later than 5 pm IST on May 31, 2018."

Even other interested parties have been invited to submit an Expression of Interest (EoI) by May 31. Once the EoIs are in, the due diligence process will commence.

Unlike the previous occasion wherein the earlier Board members had constituted an Expert Advisory Committee, this time the new Board will themselves evaluate the offers considering the financing capability, ability to consummate the transaction in a timely manner and internal as well as external approvals required to consummate the buyout of Fortis Healthcare.

"This is where the difference comes between the earlier set of directors and the newly appointed ones. Now, we can say it is a fair process which is being followed by allowing the investors to conduct due diligence. How can one expect someone to invest into a company without in the know of important information?" said a Mumbai-based expert.

In an another development, the cash-strapped hospital chain's subsidiary Escort Heart Institute & Research Centre Ltd (ENIRCL) has been asked to deposit Rs 503.36 crore by the Directorate General of Health Services over a non-compliance issue.

As per an exchange filing, the amount is to be deposited "on account of unwarranted profit allegedly made by it by not complying with the conditions of allotment letter/ lease deed..." The payment is to be made within a month and the company is looking into legal options available to challenge the order to deposit the amount.

Fortis Healthcare has been struggling with liquidity to manage its daily operations and if it runs out of legal options, the urgency to rope in an investor would only get more serious to deposit the required amount.

Recently, Harpal Singh, Lt. Gen. Tejinder Singh Shergill and Sabina Vaisoha preferred to resign from the Board while Brian Tempest faced a vote out in the EGM held few days back. As their replacement, the demand was to get Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee as independent directors on the board.

Apart from MHE-TPG, IHH Healthcare and Munjal-Burman, others who came up with their offers included Fosun Health Holdings and KKR-backed Radiant Life Care. A year back, even Abu Dhabi-based VPS Healthcare was also in the fray, but later stepped out of the deal.

NEW ROUNDS

• Conditions include minimum investment of Rs 1,500 crore into Fortis Healthcare through preferential allotment
   
• The due diligence will be allowed upto June 10, and the final submission of binding offers will happen on June 14
   
• Sbsidiary Escort Heart Institute & Research Centre asked to deposit Rs 503.36 crore over non-compliance