NEW DELHI: Fortis HealthcareBSE -3.12 % Limited announced that its board has approved demerger of its diagnostic business into listed subsidiary Fortis MalarBSE 19.96 % Hospitals through a composite scheme of arrangement and amalgamation.
Amove aimed at creating a separate listed entities — Fortis Healtcare Limited and SRL Limited. Under the proposed scheme, SRL, which is engaged in diagnostic business and is a subsidiary of Fortis Healthcare, will be hived off and merged with Fortis Malar, which is also a majority owned by Fortis Healtcare and listed on the BSE.
As a result of the restructuring scheme, Fortis Malar will no longer be owned by Fortis Healthcare. Its ownership will be distributed directly among the Fortis Healthcare shareholders that include its promoters Malvinder Mohan Singh and his younger brother Shivinder Mohan Singh and public.
As a result, the Singh family will directly own 40.6% stake in Fortis Malar, which will be changed to SRL Limited. It is proposed to be listed on National Stock Exchange (NSE). After the completion of the scheme, 58.1% stake in Fortis Malar will be with the public and Fortis Healthcare through its wholly owned subsidiary FHL will own 1.3%. Currently, Fortis Healthcare own 56.4% stake in SRL, another 38.9% stake is owned by private equity firms and financial institution and balance 5.3% stake is owned by the Singh family.
Under the scheme of arrangement, Fortis Malar will sell its hospital business in Chennai to its parent Fortis Healthcare on slump sale basis for Rs 43 crore. In the process it will exit from the patientcare business and will focus on only diagnostic business.
In the first step of the scheme, as a consideration of demerger of diagnostic business, Fortis Malar would issue and allot the equity shareholders of Fortis Healthcare (Singh family and public shareholders) 0.98 equity shares of Rs 10 each of Fortis Malar for every 1 equity share of Rs 10 each held by them in Fortis Healthcare.
This in effect means that if a shareholder has 100 equity shares in Fortis Healthcare, he will get additional 98 equity share of Fortis Malar as consideration of transfer of diagnostic business (SRL) under the scheme. Fortis Malar will issue about 51.2 crore equity shares in the process.
In the second step, SRL will merger with Fortis Malar. As a result, Fortis Malar will allot equity shares to shareholders of SRL (excluding itself) in the ratio of 10.8 equity share for 1 equity share held by them in SRL. As a result, Fortis Malar will issue additional 37.8 crore equity share to the shareholders of SRL (except Fortis Healthcare).
The demerger will give exit option the PE firms that had invested in SRL few years back. They have started the exit process and had appointed investment bankers to sell their stake in the diagnostic firm. The process was called off due the severe difference over the valuation.
“We believe this will unlock immense value for all the shareholders. As a result of the new synergistic groupings, both the hospitals and diagnostic businesses will benefit from greater clarity, a strong focus and an independent growth trajectory,” said Malvinder Mohan Singh executive chairman of Fortis Healthcare.
“Equally, this will enable the accelerated pursuit of their respective business goals while empowering them to reach their fullest potential,” he added.