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If you thought last week’s drama in Karnataka was the ultimate show of how alliances can change the fate of political parties, Tuesday may present a glimpse of how the ‘swing vote’ works in corporate deal-making too.
The Rana Kapoor-led YES Bank, India’s fourth largest lender, which owns a little over 15 per cent of Fortis Healthcare (FHL), could decide the fate of an acquisition deal that has been in the works for around 18 months now.
The fate of the Munjal-Burman combine’s bid to acquire FHL, which has board approval, hinges on how YES Bank votes in tomorrow’s extraordinary general meeting (EGM), called by other institutional shareholders.
Private equity (PE) funds East Bridge Capital and Jupiter Asset Management, which together hold a 12.04 per cent stake in FHL, called for the EGM on May 22. The FHL board members, whose removal is being sought, approved the Munjal-Burman bid but are accused of poor corporate governance standards and failure to fairly represent shareholder interests.
And then there were three
On Sunday, Fortis Healthcare said that one of the directors, Lt Gen Tejinder Singh Shergill, had resigned from the board citing personal reasons.
According to PTI, in his mail to Fortis, Gen Shergill said: “Having previous knowledge of the company and despite my various commitments, I had agreed to join the board of Fortis Healthcare Ltd to complete the quorum as several members had left the board; Now that there are sufficient members on the board, my many commitments preclude my sparing any further time. Kindly accept my resignation.”
The Munjal-Burman deal could fall apart if the board members are removed.
The FHL EGM requires 51 per cent of the votes from minority shareholders to pass the proposed resolution for removal of the board members. On Tuesday, all eyes will be on YES Bank as it is the single largest shareholder in the company and could cast the swing vote.
Apart from East Bridge Capital and Jupiter Asset Management’s 12.04 per cent stake in FHL, 33 per cent is scattered among 171 foreign institutions.
The two PE players are supported by foreign players, including York Capital Management, Ward Ferry Management, Blackrock, Elliott Capital and Karst Peak Capital.
On the other side, YES Bank, with its 15.14 per cent stake, which became the top shareholder in FHL after invoking pledged shares of the erstwhile promoters, has been a mute spectator to the FHL saga.
Another 2 per cent is held by Axis Bank and 4.55 per cent is held by domestic mutual funds. In addition, 31.69 per cent is held by non-institutional shareholders, including domestic retail and high net-worth individuals.
According to experts, the voting could be a close contest as not all the foreign and domestic institutions and retail players will come to vote. In such a scenario only those holding a large chunk could act as ‘king makers.’
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