The proposed merger of Fortis Healthcare Ltd (FHL) with Manipal Hospital Enterprises has come under the shareholders’ fury with investors, who are upset with the terms of the merger, dumping the shares of Fortis Healthcare on the exchanges on Wednesday. As a result, Fortis share price crashed by 13.37 per cent on Wednesday, making the investors poorer by Rs 987 crore following the fall in the market capitalisation to Rs 6,400 crore.
Fortis shares plummeted by 13.37 per cent to Rs 123.4 on the BSE on Wednesday. Fortis board had on Tuesday late night approved demerger of its hospitals business, which will be acquired by Manipal Hospitals and TPG Capital in a deal worth around Rs 15,000 crore. It also approved the sale of 20 per cent stake in its diagnostics chain SRL to Manipal.
“The deal is in favour of Manipal Hospital. Minority shareholders are not happy with the merger terms especially the valuation,” said veteran BSE dealer Pawan Dharnidharka. As part of the deal, when the demerger becomes effective, for every 100 shares of FHL held by a shareholder, he/ she will receive 10.83 shares in Manipal Hospitals — the resultant combined hospitals business. In this deal, the FHL’s hospital business has been valued at Rs 5,000 crore, while Manipal Hospitals has been valued at Rs 6,000 crore.
“The merger will take time. The merging of Fortis into Manipal will take between 10 to 12 months,” FHL CEO Bhavdeep Singh said in a conference call on Wednesday. The newly formed entity would have the name of Manipal Hospitals and it would be a publicly traded company listed on NSE and BSE.
“When you take into account the value of Fortis Hospitals and Manipal Hospitals and the money being infused by the Manipal Group, the deal value adds up to Rs 15,000 crore,” Bhavdeep Singh added. In the newly formed hospital entity, which would be one of India’s biggest healthcare providers, about 38 per cent would be owned by Manipal Chief Executive Ranjan Pai, while TPG would hold 20.7 percent.
When asked about this SFIO investigation on FHL, Bhavdeep Singh said on Wednesday: “We are cooperating with the ongoing SFIO investigations.” Both Malvinder Singh and his brother Shivinder Singh, who are chief promoters of Fortis group, had quit from the boards of Fortis and Religare last month. The Serious Fraud Investigation Office (SFIO) is probing Fortis Healthcare and its other group company Religare Enterprises for alleged frauds, Minister of State for Corporate Affairs P P Chaudhary told Lok Sabha last Friday through a written reply.
The combination of Manipal Hospitals and Fortis Hospitals will result in the creation of the largest provider of healthcare services in India by revenue with 41 hospitals in India and four hospitals, the FHL stated on Tuesday. The Delhi High Court had on January 31 upheld an international arbitral award of Rs 3,500 crore passed in favour of Japanese pharma major Daiichi Sankyo, which had alleged that the former promoters of erstwhile Ranbaxy Laboratories had concealed information about proceedings against them by the US Food and Drug Administration.