In a blow to the IHH-Fortis deal, the Supreme Court on Friday gave directions that will stall the Malaysian healthcare group’s acquisition of the India’s second largest hospital chain, lawyers said.
“Issue notice… Status quo with regard to sale of the controlling stake in Fortis HealthcareNSE -6.70 % to Malaysian IHH Healthcare Berhad be maintained,” stated the court in its interim order.
According to lawyers present during the proceedings, this means that IHH cannot move forward with its open offer to pick up an additional 26% stake in the hospital chain until further court orders. However, this order is not expected to have any impact on the 31% stake that IHH has already picked up in Fortis, one of them said.
Fortis told the stock exchanges that it was not a party to the ongoing proceedings. “We are awaiting the receipt of this order and upon consideration of the same, we shall respond appropriately in accordance with applicable law,” the company told the Bombay Stock Exchange.
Shares of Fortis plunged as much as 14% intraday on Friday, before closing at Rs 141.65 apiece, 6.8% lower than the previous close.
The latest development follows a contempt petition filed by Japanese drugmaker Daiichi Sankyo against Fortis promoters Malvinder and Shivinder Singh and Indiabulls Housing Finance Ltd, to which shares in Fortis were pledged and later invoked.
ET’s queries to IHH and Daiichi’s counsel remained unanswered as of press time on Friday.
IHH CEO Tan See Leng had told ET on November 14 that Daiichi’s ongoing litigation against the Singhs was not likely to impact progress of the deal.
“We were advised by our lawyers and our financial advisors. The risk of us taking the hospitals back into the Fortis umbrella using our preferential allotment seems to be fairly well mitigated,” said Tan, adding that this was due to the removal of the Singhs from Fortis’ promoter category.
According to Daiichi’s petition, a copy of which ET has viewed, the Japanese firm alleges that companies controlled by the Singhs as well as Indiabulls violated previous orders by the apex court to maintain the status of encumbered and unencumbered shareholding in Fortis.
Daiichi argued on Friday that the IHH-Fortis deal would impact the enforcement of its arbitration award against the Singhs, according to one of the lawyers cited earlier. In April 2016, a Singapore tribunal ordered the brothers to pay the Japanese firm damages for concealing information regarding wrongdoing at Ranbaxy when selling the company to it for $4.6 billion in 2008.
Source: Economic Times