India: IHH’s Fortis takeover halted after contempt of court ruling

Photo: Reuters

India’s Supreme Court refused to remove a barrier to the takeover of embattled hospital chain Fortis Healthcare Ltd. by Malaysian operator IHH Healthcare Bhd, the latest twist in one of the country’s most contentious corporate sagas.

The court held Fortis’ founders — Malvinder Singh and Shivinder Singh — guilty of contempt of court and said it could start similar proceedings against the company, according to a judgment Friday. This effectively halts IHH’s open offer to Fortis shareholders that would have brought its holdings in India’s second largest hospital company above 50%. IHH is already Fortis’ largest shareholder with a 31% stake.

Fortis shares fell 8% in Mumbai, the biggest drop since March 2018. IHH is awaiting the written judgment from the court and will thereafter “consult its advisers for its next course of action,” according to its spokesman. Fortis didn’t immediately respond to an email seeking comments.

The detailed court order, that will explain why Fortis is facing contempt action, is expected later in the day.

Also named in the contempt verdict was Indiabulls Housing Finance Ltd., the lender who accepted Singh brothers’ Fortis shares as collateral and then seized them when they failed to repay. This went against an earlier judicial order that had forbid the Singh brothers from selling or diluting their shareholding in Fortis.

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Fortis, at its end, now will have to prove that it has not violated any court orders and request that the open offer be allowed to go through, in future hearings. It can also seek review of the verdict by the same court bench.

The block comes just as IHH’s efforts to turn around Fortis’ fortunes through cost-cutting was starting to show results. It will hobble the company’s attempt to move past a scandal in which it was allegedly defrauded of millions of dollars by its founders. The Singh brothers are no longer shareholders in Fortis.

IHH’s attempt to become Fortis’ majority shareholder was halted last year, when Japanese drugmaker Daiichi Sankyo Co. contested the deal as part of its efforts to recover $500 million from the Singh brothers.

Daiichi Sankyo said that it had been promised some Fortis shares by the Singhs in a decade-old fraud claim, before the shares were seized by the brothers’ creditors.

The takeover fight for Fortis has seen as many as four separate bids, two scrapped deals, and the replacement of most of the company’s board.

Shareholders finally approved Malaysian hospital operator IHH’s takeover offer in August 2018, and the company has since embarked on a thorough revamp. New Chief Executive Officer Ashutosh Raghuvanshi’s cost cutting campaign has already begun to show in the company’s results.

The latest ruling adds another chapter in the precipitous fall of a multi-billion dollar business empire that Singh brothers once helmed.

The brothers were arrested last month to face charges of fraudulently diverting nearly $337 million from a lender they controlled, in a separate legal wrangle.

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.