Khazanah makes formal offer for Parkway

Friday June 11, 2010



By TEE LIN SAY

linsay@thestar.com.my


But the S’pore firm’s shares closed above the offered S$3.78 a share yesterday



PETALING JAYA: Khazanah Nasional Bhd formally made an offer to shareholders to acquire 313 million shares of Singapore’s Parkway Holdings at S$3.78 per share. However, Parkway’s share price rose above Khazanah’s offer price yesterday, closing at a 52-week high of S$3.87, amid speculation that a counter bid for Parkway could be in the offing.



Parkway’s shares are up 32% year-to-date and are trading at forward price earnings ratio of 27 times its financial year 2010 earnings, according to Bloomberg data.



Still, that may not stop India’s Fortis Healthcare Ltd from mounting a counter bid for Parkway.



Khazanah last week said its partial general offer for Parkway, which will cost it S$1.8bil (US$835mil), was to bring its shareholding in Parkway to 51.1% from 23%.



In March, Fortis surfaced as Parkway’s single largest shareholder when it bought 23.9% of Parkway from US private equity firm TPG for S$959mil (US$678mil). It subsequently upped that stake to 25.3%. Fortis then appointed its representatives to the chairmanship of Parkway and took three other board seats. Khazanah only has two seats on Parkway’s board.





It has been speculated that Khazanah’s intention is to oust Fortis from controlling Parkway.



Yesterday, Bloomberg reported that Fortis said it was keeping its options open with regard to its strategy on Parkway.



Earlier this week, Fortis said it would be raising US$585mil by issuing securities. Speculation is rife that Fortis is doing this to fund a possible counter bid for Parkway.



A Singapore-based analyst who tracks Parkway feels that Parkway investors may be receptive to Khazanah’s offer.



“In the absence of other catalysts, I think Parkway shareholders should be happy. Parkway’s share price has not appreciated like that in the last two years. This offer also came when markets are tanking, so there is excitement,” she said.





On the issue of Fortis counter-bidding Khazanah, analysts remain uncertain.



“Fortis may not necessarily be building up their war chest to counter-bid Khazanah. Fortis has many other businesses and they have many other things they want to do. Would they also want to put so much money in one asset?” asked another Singapore-based analyst who tracks Parkway.



Fortis is one of the largest hospital chains in India, and its strategic stake in Parkway makes it one of the leading players in Asia.



Its stake in Parkway enables Fortis to establish a Pan-Asian presence increasing its network to 62 hospitals with combined bed strength of over 10,000.



Khazanah, on the other hand, had clearly stated that healthcare was one of its core investment areas. The government investment arm already owns 60% in Pantai Medical Group and a 67.5% stake in private medical college International Medical University.



It also has 12.2% in India’s Apollo Hospitals Ltd, India’s largest private hospital group. Interestingly, Apollo and Fortis are arch-rivals in India, according to news reports.



“Both Fortis and Khazanah want Parkway because it is a valuable franchise. They are not buying it for goodwill. I think some shareholders realise that healthcare is becoming a big play, so will want exposure to this asset. However, they may also decide to accept Khazanah’s offer or any other counter bid as the price looks attractive. These investors can always buy more Parkway shares later, if the price settles down after this tussle,” said one of the Singapore-based analysts.


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