The Fortis Healthcare (FHL) board’s decision on Thursday to pick Hero-Burman as the winning suitor for one of India’s leading hospital chains is set to face opposition from minority shareholders of the company.

According to sources close to the minority shareholders, there were several deficiencies in the offer made by the Burman-Munjal consortium, which will be taken up with the company board.

“The offer made by some of the other bidders looked far more attractive, so there is no clarity on why the board picked a lower bid,” a source told BusinessLine on condition of anonymity.

A deal to buy out FHL was in the works for nearly 18 months. The company board had to choose between four binding bids, submitted by Manipal-TPG, IHH Berhad, the Munjal-Burman combine and KKR-backed Radiant Life Care.

After several rounds of offers, the Munjal-Burman combine recently presented the FHL board with a “revised proposal” to invest ₹1,800 crore directly, without any due diligence. Of this, ₹800 crore will be through a preferential allotment of equity shares at ₹167 apiece.

Institutional shareholders say there was a higher bid of ₹175 a share by IHH.

Five of the eight directors of the Fortis Board voted in favour of the offer made by the Hero-Burman duo for a stake in the company’s hospital and diagnostics chain, while three voted for a separate bidder.

“FHL has not given any rationale for accepting the Munjal-Burman bid and the key point is that the board was divided in its decision,” said JN Gupta, founder, Shareholder Empowerment Services, a proxy advisory firm. “This indicates that it is not necessary that the bid accepted is the best. There was a higher offer for the deal that could have benefited shareholders even more than what the board accepted. It is quite a puzzle to know in whose favour were a few board members working.”

Old board members of FHL who accepted the bid have been accused of poor corporate governance standards and failure to fairly represent shareholder interests.

Removal of directors sought

Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee were recently inducted onto the Fortis board after they were nominated by East Bridge Capital and Jupiter Asset Management, a group of minority shareholders that had sought the removal of existing directors Brian Tempest, Tejinder Shergill, Sabina Vaisoha and Harpal Singh.

Fortis shareholders have to ratify the decision. They include National Westminster Bank Plc as trustee of Jupiter India Fund and East Bridge Capital Master Fund, which together hold a 12.04 per cent stake in FHL. Institutional shareholders have demanded that the matter of removal of these directors from the board be taken up at its EGM on May 22.

The board’s decision will be placed before shareholders for approval within the next 30 days.

More reports on p6

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