• India’s Supreme Court was reported to have ordered status quo on the 4,000 crore rupiah (RM2.348bil) sale of Fortis Healthcare Ltd to IHH Healthcare last Friday.

• According to Bloomberg, the ruling came in a case filed by Daiichi Sankyo Co Ltd as part of its effort to recover US$500mil from Fortis’ founders and ex-owners Malvinder and Shivinder Singh. A status quo order may be issued by a judge to prevent any of the parties involved in a dispute from taking any action until the matter can be resolved.

• Recall that IHH became the controlling shareholder of Fortis upon the completion of the acquisition of 31.1% stake in Fortis last month.

• This triggered a mandatory takeover offer (MTO) to acquire up to 26% of the expanded capital from the existing shareholders of Fortis. The open offer was initially scheduled to commence on 18th December.

• We view this as slightly negative as the MTO is likely to be suspended, delaying the takeover process until the court comes to a decision.

• However, there will be minimal impact operationally as IHH remains a controlling stakeholder with management control, given that it currently has 4 board seats in Fortis.

• Fortis’ operations will still be consolidated as indirect subsidiaries of the company upon the completion of subscription of share capital in 4QFY18.

• We maintain our HOLD call with unchanged FV of RM5.30/share which implies an FY19F PE of 40.9.

Source: AmInvest Research - 17 Dec 2018