IHH puts Fortis takeover on hold; clarifies no collusion with Singh brothers

MALAYSIA'S IHH Healthcare on Monday said that its open offers for cash-strapped Indian hospital chain Fortis Healthcare and the latter's subsidiary, Fortis Malar Hospitals (FMH), will not proceed for the time being.

This is in light of the Nov 15 judgment passed by India's Supreme Court which included a notice of contempt issued to Fortis and others.

The country's top court last week held Fortis' founders - Malvinder Singh and Shivinder Singh - guilty of contempt of court, and said it could start similar proceedings against the company.

This effectively halts IHH's open offer to Fortis shareholders that would have raised its holdings in the embattled Indian company above 50 per cent. IHH is already Fortis' largest shareholder with a 31.1 per cent stake.

IHH said it remains committed to proceed with the Fortis open offer once the stay is lifted by the Supreme Court. The next hearing date for the matter is Feb 3, 2020.

IHH is seeking legal advice on the matter and will decide on a course of action later. It added that Fortis is also evaluating the Nov 15 court judgment and seeking legal advice.

IHH also clarified that its 31.1 per cent stake was acquired by its wholly-owned subsidiary Northern TK Venture (NTK) via a subscription - through a preferential allotment, and not a purchase or transfer of existing Fortis shares. The subscription was completed on Nov 13, 2018, at a price of 170 rupees per share, or about 40 billion rupees (S$759 million) in total.

This subscription was undertaken in a "fair and transparent" manner, after obtaining corporate and regulatory approvals and in accordance with all applicable laws, IHH said on Monday.

Moreover, the subscription was undertaken and completed after Mr Malvinder Singh and Mr Shivinder Singh were no longer in control of Fortis, IHH added.

The Malaysian hospital operator noted that it has at no time dealt with nor colluded with the Singh brothers or any entities related or controlled by them in relation with the subscription.

Fortis accepted an investment offer from IHH in July 2018 after an extended bidding war for control of the company.

After IHH subscribed to the 31.1 per cent stake, it made a mandatory open offer to acquire an additional 26 per cent of the enlarged share capital of the Indian company for at least 170 rupees apiece, which works out to 33.5 billion rupees in total.

IHH also made a mandatory open offer to buy up to a 26 per cent stake in FMH, which operates clinics and hospitals, for 58 rupees per share or about 283.9 million rupees in total. The FMH offer is subject to the completion of the Fortis offer.

The Indian Supreme Court put the Fortis sale on hold last December. Last week, the court said contempt proceedings had been initiated against Fortis for violation of its December 2018 order to maintain status quo on the deal with IHH. Japanese drugmaker Daiichi Sankyo had argued that certain transactions between IHH and Fortis violated the court's directions.

IHH is listed in Singapore and Malaysia. Its shares on the Singapore Exchange were trading up two cents or 1.16 per cent at S$1.75 as at 1.59pm, after the announcement was made.