Mumbai/New Delhi: The Supreme Court of India has refused to lift the block on completion of 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 and long drawn out corporate battles.
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 plunged as much as 17.4%, the biggest intra-day drop since February 2018, after the verdict was read out. Fortis and IHH didn’t immediately respond to emails seeking comments on the court ruling.
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.
IHH’s attempt to become Fortis’ controlling 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.
Daiichi is also pursuing the Singh brothers directly for the money it says it is owed in another court case. – Bloomberg