Three directors quit as takeover fight for Fortis drags on

Harpal Singh, Tejinder Singh Shergill and Sabina Vaisoha cited personal reasons for their resignations, coming days after two major Fortis shareholders said the directors had not met their fiduciary duties.

Their departures raised fresh questions about the direction cash-strapped Fortis will take as it considers bids from five parties who have proposed to buy whole or part of the company.

Fortis has received more than a dozen competing offers since it first agreed in March to a proposal from a consortium led by rival Manipal Hospitals Enterprises.

Fortis then said in May it planned to accept an offer from Hero Enterprise Investment Office and Burman Family Office that valued the company at 90 billion rupees. Shareholders responded by pushing the company’s shares down 5 percent.

Eastbridge Capital and Jupiter India — two large investors who together control about 12 percent of the company — had called for Tuesday’s vote.

They said the directors had not satisfactorily exercised "their respective fiduciary duties towards shareholders and have failed to maintain expected levels of corporate governance," according to a filing made by Fortis last week.

A fourth director, Brian Tempest, still faces a vote at Tuesday’s meeting.

Indian proxy advisory firms have previously questioned the independence of the Fortis board.

“Shareholders need a decision-making body that is objective, independent, and does have a historical association with the promoter group or their companies,” Institutional Investor Advisory Services said in a note last month.

Eastbridge and Jupiter believed that the four directors were not independent and had been appointed by Fortis’ founders, a source close to the two shareholders told Reuters last week.

Harpal Singh, one of the three directors who resigned, defended the board’s decisions.

In a letter made public by Fortis on Sunday, Singh said the selection of the Hero-Burman offer was based “on criteria of certainty, simplicity of structure, no walk away rights, an early infusion of funds, capacity to address strategic needs and the ability to traverse a challenging landscape”.

Fortis’ founders quit as directors of the company in February and have denied any wrongdoing.

Fortis itself is under investigation in India for financial fraud, though it said in April it expected the probes to be over in 12 months.

Recent developments in the healthcare industry have made the company a takeover target.

Private healthcare spending is rising, and the government is working on expanding insurance to hundreds of millions of people in a country that lacks adequate heath facilities. The insurance scheme is expected to benefit private hospitals such as those run by Manipal and Fortis, analysts say.

Days after Fortis said it planned to accept the Hero-Burman offer, Manipal Hospitals and private equity firm TPG Capital Management sweetened their bid to buy the company, sparking a rally in Fortis shares.