Fullerton Health shareholder spat clouds US$1 billion sale

A BITTER feud among three friends-turned-foes - all shareholders and co-founders of Fullerton Healthcare Corp (Fullerton Health) - could imperil the months-long sale process of the Asian healthcare solutions firm, including last week's sweetened non-binding offer by Beverly-Hills private equity firm Platinum Equity for the Singapore-headquartered firm.

Ties over the past year or so have frayed between David Sin of SIN Capital, which majority-owns Fullerton Health, and his long-time doctor-colleagues-turned pals Michael Tan and Daniel Chan, the firm's minority shareholders and executive directors.

An early sign of the enmity emerged at the end of 2019, when Dr Tan and Dr Chan stepped down as the medical-services firm's chief executive officer (CEO) and deputy CEO respectively. Following a search for an executive CEO, Ho Kuen Loon was appointed Fullerton Health's group CEO in Jan 2020.

The simmering friction culminated this month in a legal suit filed by Mr Sin, Fullerton Health's president and deputy chairman, against the duo. At the heart of the dispute is how much of Fullerton Health, which also counts China's giant insurer Ping An Insurance (Group) as a shareholder, should be put on the block for a sale that could fetch about US$1 billion.

Mr Sin wants to sell all of Fullerton Health, a company which he has been credited for transforming from a Singapore-centric entity to a pan-Asian platform, since he emerged as majority owner in 2012. The proposed transaction for the sale of up to 100 per cent of Fullerton Health, called "Project Phoenix", was in fact approved by its board in December last year, following which it launched a two-phased bidding process this year, court documents revealed.

However, Dr Tan and Dr Chan do not wish to sell their shares in the firm and are keen to stay on as directors and shareholders. Bank of America Securities (BOFA) is the deal's financial adviser.

In his statement of claim obtained by The Business Times, Mr Sin accused the duo of influencing and manipulating the bidding process and communicating unilaterally with the firm's clients and potential bidders to further their personal interests in retaining their shares and management role, at the expense of firm's interest and the other shareholders.

He accused them of breaching their fiduciary duties. Their actions, he claimed, have caused concerns among potential bidders over the fairness of the bidding process and deterred submission of bids and resulted in less favourable offers.

In their defence, Dr Tan and Dr Chan referred to Mr Sin's claims as "scandalous, frivolous or vexatious and/or an abuse of process".

Project Phoenix involves a sale by Fullerton Healthcare shareholders of their shares in the healthcare firm and not a sale by the firm of any of its assets. This, they said, was a "vital distinction" and the question whether to sell the shares was a matter for each shareholder to decide - not the board, which plays a "very limited role".

Of just over 50 potential bidders contacted in the first round, court documents disclosed that the firm received nine non-binding offers (NBOs) including from KKR, Platinum Equity, Warburg Pincus (WP) and Coalition Capital. WP and Coalition were shortlisted in May and a month later, submitted final binding bids based on the same enterprise value (EV).

Around April, Fullerton Health board gave the green light to explore a possible acquisition of the medical-services firm by a special-purpose acquisition company (SPAC). This drew a preliminary offer from Longview Acquisition Corp II, a third-party SPAC listed on the New York Stock Exchange and sponsored by a New York based hedge fund, documents revealed.

Longview II's offer was based on an EV that was 8 per cent higher and a proposed equity value that was 4-16 per cent higher than the terms offered by WP and Coalition. This made the SPAC's offer "superior" to those of the other two. This means Fullerton Health shareholders would receive more, said Mr Sin in his statement of claim, without naming the SPAC.

However, he alleged that Dr Tan and Dr Chan "made it clear" to Longview II that they would not support its offer, as it did not provide them with a significant role to play in the business post-acquisition.

In June, Longview II pulled out of submitting a formal bid, citing "operating and governance complexities between founders and investors that have yet to be resolved", among others.

In the duo's defence where they name the SPAC, they said Longview II made it clear that it was not proceeding with a bid as the healthcare firm had "numerous put or call arrangements" which created significant uncertainty. They claimed that the final bids by WP and Coalition were relatively superior as Longview II's proposal, which ascribed a "much lower" enterprise multiple, was merely preliminary and non-binding.

Then, a week ago, Platinum swooped in with an "unsolicited" NBO to the deal's adviser. The doctors, formerly with Parkway Hospital, objected to Platinum's offer on the basis that there was no certainty of a binding bid that would be superior to Coalition's bid.

However, they said that despite their objections, Fullerton Health's board put Platinum's offer up to a vote at a meeting last Friday. The duo abstained from voting while all the other directors voted in favour of accepting the offer. They have claimed that the board's "decision" to accept Platinum's offer has no legal effect or consequence.

Mr Sin is represented by Senior Counsel Alvin Yeo and Koh Swee Yen of WongPartnership. Dr Tan and Dr Chan have hired Senior Counsel Davinder Singh and Jaikanth Shankar of Davinder Singh Chambers as their counsel.

READ MORE: Sale of Fullerton Health draws eight non-binding bids in 1st round: sources