The country's serious fraud office and the stock-market regulator are investigating Fortis even as it tries to sell itself to one of five serious suitors, which include Malaysian, Chinese and homegrown Indian buyers, as well as American private equity.
The founders of Fortis helped themselves to at least $76 million of the company's cash, Bloomberg News reported in February. By the end of this month, Fortis is legally required to produce annual financial results. Just how the board plans to pull that off without locating the missing money is beyond me, especially when it doesn't even seem to be making any effort to recover the funds.
But a more puzzling question is, why are some of the original directors still hanging around?
Leaving aside its temporary cash crunch, Fortis is a prized asset. It's drawn interest from Malaysia's IHH Healthcare Bhd., KKR & Co.-backed Radiant Life Care Pvt, China's Fosun International Ltd. and Manipal Health Enterprises Pvt, an Indian hospital operator backed by private equity firm TPG Capital LP. For the board to dump all of them and recommend investors take the offer put forward by the Burman and Munjal families makes no sense.
For a start, they've no experience in healthcare. Even the three new independent directors who've come on board since the founders' departure were unimpressed by their proposal. It neither offers a cash exit to investors, nor does it commit to pump even half as many funds into the business as IHH. While Manipal would only invest about 21 billion rupees ($309 million), compared with IHH's 40 billion rupees, it's promised to do so at 180 rupees a share. That's the most anyone has put on the table.
Fortis's board has said it wants a binding offer to infuse cash quickly. That's a flimsy defense, considering IHH is asking for only one week of due diligence to make its offer unconditional. And while Manipal's proposal to merge its own southern Indian hospitals with Fortis's northern-based operations is more complex, the synergies mustn't be dismissed. With almost 13,000 beds, an expanded Manipal would be a third bigger than Apollo Hospitals Enterprise Ltd., the current market leader.
Last Thursday, IHH extended its offer by two more weeks, after Manipal sweetened its bid. The suitors don't want to throw in the towel. At least not before shareholders decide the fate of the four directors installed by founders Malvinder and Shivinder Singh, when the brothers were still running Fortis.
With even Shivinder Singh now complaining to the board about the process, the four directors' joint note saying they're working in the best interests of all shareholders rings hollow.
If they check out now, they won't be missed.
(Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.)
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