Offer circular for Parkway out this week

Monday June 21, 2010



By RISEN JAYASEELAN

risen@thestar.com.my


PETALING JAYA: While speculation remains rife as to whether a bidding war may ensue over Singapore’s Parkway Holdings Ltd, some clarity on the matter should surface as early as this Thursday.



By then, the board of Parkway will need to issue the offer circular to shareholders, which will contain the crucial IFA or independent financial advisor’s recommendation on the partial offer by Khazanah Nasional Bhd.

The offer circular (a more detailed version of the offer document that has already been sent to Parkway shareholders) will also include an insight into what directors of Parkway, who directly own shares in the company, plan to do with their shares in light of the Khazanah offer. They are required to disclose how they intend to deal with their shares in this offer period.

This Thursday is also significant as it is the date of record for the purposes of shareholder votes on the Khazanah offer. This means that only registered Parkway shareholders as of that date will be able to vote on the Khazanah offer.





It should be noted that there are two parts to how Parkway shareholders are to decide on the Khazanah offer.



First, Parkway shareholders (other than Khazanah) have to vote on the offer. A simple majority of votes will be sufficient to then move to the next stage, which is for shareholders to decide whether to accept or reject the offer, in respect of the shares they own.



Parkway had earlier stated that it had hired Morgan Stanley as its IFA to assess the partial offer made by Khazanah.

Like all standard IFAs, Morgan Stanley will have to assess just about every aspect of the offer and make a clear recommendation.

Such an assessment should include Khazanah’s financial standing, including its plans for funding the partial offer as well as its strategic and business plans for Parkway.

The assessment will also look into the likelihood of a counter-bid by other parties such as Fortis Healthcare Ltd, the Indian party which is seemingly locked in a battle with Khazanah for control of Parkway.

Hence shareholders will get a good insight into whether Fortis is really keen on making a counter offer for Parkway shares, as has been highly speculated. A counter offer would require Fortis to cough up some US$2.3bil, by some estimates.

Under Singapore’s takeover rules, Fortis will have to make a full general offer for Parkway shares, if it decides to counter-bid Khazanah’s offer. Khazanah, on the other hand, needs only make a partial offer every time it wishes to make a new bid, it is understood.

Fortis, which owns about 25% of Parkway versus Khazanah’s 23.8%, is likely to want to vote down Khazanah’s offer. It could do so if it garners the support of a sufficient number of other shareholders of Parkway.

However, that is unlikely, said an analyst, considering that every minority (excluding Fortis) shareholder in Parkway knows that if Khazanah’s offer does not take off, Parkway shares will recede. “Shareholders are more likely to be hoping for a bidding war to take place, as that would maximise the value of their holdings,” said the Singapore-based analyst.

For Fortis though, thwarting the Khazanah offer at the voting stage would be ideal as it can keep up its status quo of controlling Parkway, something which insiders say Khazanah is uncomfortable with.

It has been reported that the government investment fund prefers Parkway to be professionally run and institutionally owned, as was the case with Parkway up to Fortis’ entry in March, when it bought into Parkway

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