The battle for control of Parkway Holdings, Asia's largest hospital chain, is set to be fought in Singapore. Khazanah, the Malaysian government-owned investment fund, which is the second largest shareholder in Parkway through Integrated Healthcare Holdings, has fired the first salvo by offering S$1.18 billion (US $710 million or over Rs 3,900 crore) for a majority stake in the company that is currently controlled by the Singh-family promoted Fortis Healthcare.
The Singh brothers - Malvinder and Shivinder - refused to comment but are expected to launch a counter bid to retain their control. Two years ago, the brothers had raked in over Rs 100 billion (Rs 10,000 crore) by selling their stake in Ranbaxy, then India's largest drug firm.
In March, Fortis had acquired 23.9 per cent stake in Parkway for S$959 million (around Rs 3,000 crore), to emerge as the largest shareholder. Recently, Malvinder Mohan Singh had stepped down from the board of Religare, the family-promoted financial services company, to focus on Parkway, where he has taken over as the chairman. Fortis now owns 25.3 per cent, according to data compiled by Bloomberg.
Government of Singapore Investment Corporation had bought 6.58 per cent stake in Fortis, making it the second-biggest shareholder in the Indian healthcare company.
The Malaysian fund's bid for Parkway comes a week after the leaders of both countries agreed last week to resolve long-standing disputes over land and water that plagued ties for the past 20 years. Under one of the agreements, the two countries said the Malayan Railway land will be developed by a 60:40 joint venture between Khazanah and Singapore state investor Temasek.
The Khazanah offer is subject to approval by more than 50 per cent of Parkway shareholders, excluding Integrated Healthcare (see graphic on shareholding pattern). The 11-member Parkway board has four Fortis nominees, including Singh.
In a filing to the Singapore Stock Exchange on Thursday, Integrated Healthcare announced a voluntary conditional cash partial offer to increase its stake in Parkway from 23.32 per cent to 51.5 per cent by acquiring 313 million shares at S$3.78 (around Rs 126) a share. The price represents a 25.2 per cent premium to the last traded price (on 26 May) of S$3.02 a share and a 60.9 per cent premium over Parkway's 12-month volume weighted average price of S$2.35 a share.
Ahmad Shahizam Mohd Shariff, director of Integrated Healthcare, said in a press release that the Integrated Healthcare Group will consolidate Khazanah's existing stakes in other healthcare companies also to become Asia's premium regional healthcare platform.
The fund holds a 12.2 per cent stake in Apollo Hospitals, promoted by Prathap C Reddy, and Fortis' main rival in India. In addition, Apollo and Parkway have set up a 325-bed hospital in Kolkata through a joint venture, Apollo Gleneagles.
The Apollo management did not respond to repeated phone calls regarding Khazanah's plans to bring all investments, including the one with Apollo, under a regional platform. A Reuters report said Apollo was willing to participate with the fund in expanding in Asia.
Including India, Parkway runs 16 hospitals with more than 3,400 beds in China and Malaysia among other Asian countries, according to its website.
Following the announcement this morning, the shares Fortis and Apollo rose on the Bombay Stock Exchange. Fortis shares closed 7.34 per cent higher at Rs 149.85 on the Bombay Stock Exchange (BSE), while Apollo Hospitals Enterprise rose 8.02 per cent to Rs 761.40 a share.
- Could trigger a takeover fight with Fortis
- Parkway runs 16 hospitals in 5 countries
- Fortis stock gains 7.3% on BSE
- Apollo Hospitals gains 8.02%
"The last word on the subject has not yet been spoken. One would expect a suitable response from the Fortis management soon," said Sanjiv Kaul, managing director at private equity fund Chrys Capital. Kaul said Fortis would have probably anticipated this kind of response from Khazanah as both are minority shareholders with just over 20 per cent stake. "Essentially, the remaining shareholders of Parkway will have to take a call on this matter. One has to decide who will bring in more value to Parkway's businesses," he added.
"Fortis can either come out with a counter offer, or prefer to remain as a minority shareholder. It can also sell its stakes to Khazanah and make 6 per cent profits. However, all three options are not attractive for the company at the moment. The only probable reason for increase in share price could be an anticipation of a good performance as Fortis results are to be announced tomorrow," Ranjit Kapadia, vice-president, Institutional Research, HDFC Securities said.
Stock market analysts said they find no reason for an upside for Fortis as a counter-offer means an additional expense of at least Rs 30 billion (Rs 3,000 crore).