The world’s largest activist investor Elliott Management is circling the scandal-hit Fortis HealthcareBSE -0.61 % that is facing takeover bids. Hedge fund giant Paul Singer-led Elliot, which has caused several top management exits and selloffs through activist boardroom interventions, is mopping up FortisBSE -0.61 % shares in a rare show of interest in a public company traded solely on Indian exchanges, people aware of the developments said.
The New York-based Elliott, which manages about $40 billion globally, has taken on several American and European corporate heavyweights in its 40-year history, including Warren Buffett when it blocked Berkshire Hathaway’s takeover of energy company Oncor last year. It has scaled up activist investments outside the US with campaigns in 50-odd companies across 14 countries — one against South Korean chaebol Samsung dominated Asian business headlines two years ago.
Elliott has started buying shares and is said to be working with Alvarez & Marsal and others in talking to Fortis creditors, which have converted loans into shares, sources said. If it snaps up a reasonably large shareholding, the activist fund is likely to intervene in the Fortis boardroom, which some see as a continuation of the controversial founders, and work with an independent management.
Troubled billionaire siblings Shivinder and Malvinder Singh have seen their holding fall to about 0.8% after losing their pledged shares. They quit the company board and are also facing allegations of siphoning off money, which they have stoutly denied.
Yes Bank, which invoked pledged shares, now owns around 17% in Fortis. Another lender Axis has under 5%, while Edelweiss offloaded a bulk of the converted shares.
An emailed query to Elliott Management over the weekend remained unanswered. Alvarez & Marsal could not be reached for comments immediately. The interest of Elliott in Fortis might complicate matters for potential acquirers like a consortium of private equity investor TPG and Manipal Hospitals, besides Malaysia’s IHH Healthcare Berhad. The bidders are awaiting investigation reports on alleged fund diversions, even as the company management and board are desperate to keep operations afloat with fresh capital infusion.
The Securities Exchange Board of India (Sebi), Serious Fraud Investigation Office and the board-appointed law firm Luthra & Luthra are investigating the reported financial irregularities.
A Bloomberg report last month alleged that the founders had taken out around Rs 500 crore from India’s second largest hospital chain.
There’s also fear that TPGManipal or IHH — in the event of triggering a takeover move — might end up facing legal action even as the full extent of the crisis unfolds.
Source: Economic Times