Supreme Court puts Fortis sale to IHH Healthcare on hold

The Supreme Court has put on hold the sale of Fortis Healthcare to Malaysia’s IHH Healthcare, on a contempt plea filed by Japanese drugmaker Daiichi Sankyo against the former promoters of the hospital chain, Malvinder Singh and Shivinder Singh. The order for maintaining status quo till further orders of the apex court means that IHH Healthcare, which had in July won the bidding war for Fortis with its Rs 4000-crore offer, will have to wait and cannot go ahead with its open offer which was scheduled to commence from December 18. The SC on February 15, 2018 allowed banks and financial institutions to sell shares of Fortis pledged with them on or before August 11, 2017.

However, it had barred sale of shares which were pledged after August 11, 2017. After the sale of Fortis to IHH materialized in July 2018, Daiichi Sankyo, moved the court alleging that the Singh brothers had created fresh encumbrances (fresh mortgages) on their shares which was barred by the SC. The petition alleged that the Singh brothers and Indiabulls directors had transferred 1.2 million shares of Fortis Healthcare held by Fortis Healthcare Holding (FHHPL) in favor of Indiabulls Housing Finance.

Daiichi Sankyo is pursuing the enforcement of Rs 3500 crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information regarding wrongdoing at Ranbaxy Laboratories while selling it for USD 4.6 billion in 2008. Meanwhile, in mid-November, Northern TK Venture, a wholly-owned indirect subsidiary of IHH Healthcare, subscribed to 23.52 lakh shares of Fortis Healthcare thereby completing the investment of IHH in Fortis.

With this preferential issue, IHH had, through NTK, infused approximately Rs 4000 crore of primary capital into the company and NTK became the controlling shareholder in the company with nearly 31.1 percent stake on the expanded capital.

The preferential allotment has made IHH the largest shareholder in Fortis Healthcare and was supposed to trigger the requirement to make a mandatory open offer to the public shareholders of Fortis Healthcare for 26 percent of the outstanding shares. However, now till further orders of the court, the open offer cannot go ahead.