Abu Dhabi, UAEMonday 6 April 2020

Krupa Global Investors no longer interested in NMC Health stake after BR Shetty's departure

Activist investor had expressed confidence in the company following a 'deep dive' analysis but backed off following resignations of founder and other directors

NMC Health said on Thursday it is fully committed to investigations after discovery of suspected fraud in its prior financial activities. Reuters
NMC Health said on Thursday it is fully committed to investigations after discovery of suspected fraud in its prior financial activities. Reuters

Krupa Global Investments said it is no longer interested in taking a "significant" stake in Abu Dhabi-based NMC Health following the resignation of founder and joint non-executive chairman BR Shetty and two other executives on Monday, as well as its executive vice-chairman Khalifa Al Muhairi last Friday.

KGI is an activist investor whose approach is "to remedy problems where correctable issues with management are causing [the] stock price to unduly suffer", according to its website. Last week, it announced plans to meet NMC Health's chief executive Prasanth Mangath after completing a "deep dive analysis" of the firm and concluding there was no off-balance sheet or debt problem at the firm.

However, in a statement on Wednesday, the company said following the resignation of the two men it had "evaluated the current situation is not in line with our strategy to take a significant stake in NMC Health".

"Mr BR Shetty and [Mr Al Muhairi’s family] built NMC Health on the basis of their good know-how and their good relationships in [the] Middle East, so KGI considers these recent top management representatives’ resignations as unacceptable," KGI said in a statement.

"KGI considers Mr BR Shetty as a healthcare specialist. Mr Shetty has dedicated his life building an empire of healthcare facilities. He founded and built the biggest healthcare provider in the Middle East based on the quality of service delivered," it added.

The company said that it was ready to renew negotiations if Mr Shetty and representatives of Mr Al Muhairi's family return to the company's management.

NMC Health's shares have been under pressure since activist investor Muddy Waters published a report on December 17 alleging that the company had manipulated its balance sheet and inflated the prices of companies it acquired.

NMC has said Muddy Waters’s claims are false and the company hired former FBI Director Louis Freeh to conduct an independent review.

Despite this, the company's shares have dropped by about 69 per cent from a closing price of £25.85 on the day prior to the report's publication. On Wednesday, the shares were trading 3.9 per cent lower at £8.11 at 1.46pm UAE time. The company has also received "highly preliminary approaches" from other parties, although private equity firm KKR subsequently ruled itself out from making a bid.

Mr Shetty stood down from the company after it reported last week that he and two other principal shareholders, Mr Al Muhairi and Saeed Al Qebaisi, had "incorrectly reported" the size of their holdings in the company.

Some 4.8 million shares held by Mr Shetty directly had been transferred to First Abu Dhabi Bank, and more than 5.1 million shares held by him were transferred to Al Salam Bank as the shares had been pledged as security against credit facilities. A further 20 million shares held by BRS International Holding, a company in which Mr Shetty is sole shareholder, may have actually been held for Mr Al Qebaisi and Mr Al Muhairi, an announcement made by the firm on February 10 said.

Of these, the company said on Tuesday that First Abu Dhabi Bank appeared to have sold about 10.9 million shares between February 3 and 6 this year. Mr Shetty has asked the bank for clarification on this matter, the statement said.

On Friday last week, another company in which the three men are significant shareholders, UAE payments firm Finablr, said it had "very recently been made aware of purported agreements" between Mr Shetty, Mr Al Qebaisi and Mr Al Muhairi that may be relevant to their respective interests in that company.

"The extent to which the purported arrangements may have affected their respective interests is not yet known to the company," the statement said.

Mr Shetty continues to serve as co-chairman of Finablr. Another of his companies, BRS Investment Holding, has a 65.14 per cent stake in Finablr, according to Bloomberg data.

Updated: February 19, 2020 08:06 PM

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