By RISEN JAYASEELAN
risen@thestar.com.my
Parties from three countries in tussle over healthcare firm
THE on-going saga at Singapore-listed Parkway Holdings Ltd has all the makings of one of the more interesting corporate stories of the year.
The characters involved include the sovereign wealth funds of Malaysia and Singapore at opposing sides of the battle.
It also reveals an insight into the secretive deal-making nature of international private equity players and the emergence of two young and ambitious Indian nationals who are using their inheritance to make a mark on the burgeoning global healthcare business.
How it started
The saga began in March, when US private equity group TPG Capital sold its 23.9% stake in Parkway to Fortis Healthcare Ltd, an Indian hospital chain for S$959mil.
That deal, believed to have been inked quickly and secretly, had triggered a sequence of events that has led to the current state of affairs.
Fortis Healthcare is the vehicle of two brothers, 30-somethings Malvinder and Shivinder Singh. In 2008, they sold their family’s 35% in Ranbaxy Laboratories to Daiichi Sankyo, Japan’s third largest drug maker, for about US$2.1bil.
They used some of that money to buy the Parkway stake, which they subsequently upped to 25.3%. That made them the single largest shareholder of Parkway (tipping Khazanah Nasional Bhd’s 23.8%) and they set out to gain control of the company, getting four board seats and making Malvinder the chairman.
Parkway is seen as a strategic investment for Fortis and the vehicle for the Singh brothers’ plans to build a global healtcare chain, reports have said. Malvinder had also relocated to Singapore recently.
Last week, Khazanah made the unexpected partial offer to gain 51% of Parkway shares at the attractive price of S$3.78 per Parkway share, which works out to a whopping S$1.18bil (RM2.76bil). The offer price was at a premium of 25.2% over the last traded price of the stock and at a 60.9% premium over Parkway’s 12 month volume weighted average price of S$2.35 per share.
Since the offer, Parkway has hogged the limelight and investor interest. Speculation of a counter bid by Fortis had pushed Parkway’s shares to a 52-week high of S$3.79 on Monday.
Khazanah isn’t the only government fund involved in the saga. The Government of Singapore Investment Corp Pte Ltd (GIC) is a shareholder of Fortis with a 6.8% direct stake and convertible bonds that could push up its stake to 13%.
If Fortis opts to make a counter bid for Parkway, it would have to launch a full general offer for Parkway, as Singapore take-over rules do not allow parties who have bought shares in the last six months to carry out a partial offer.
That could potentially cost Fortis at least S$3.1bil (RM7.25bil) to buy out the remaining shareholders in Parkway at today’s market prices.
The offer price will likely have to be higher in order to better Fortis’ chances of succeeding in its counter bid. One media report in India stated that Fortis is discussing financing options with GIC, which has led to some speculation that this saga could end up being a Khazanah vs GIC battle for Parkway.
However, this is unlikely to happen given that GIC’s mandate is to invest abroad and this could constrain it from putting its money into a battle for control over a Singapore-based and listed company, albeit indirectly.
Uncertainty
Still, even though Khazanah’s offer is an attractive one, there is no assurance that it will succeed. It is understood that Khazanah is not likely to up its offer, having made sufficient due diligence into the matter and coming up with a price it reckons should entice the minorities of Parkway.
Khazanah, which currently has a 60% stake in Pantai Medical group (the other 40% is held by Parkway) and a 67.5% stake in private medical college International Medical University, would be happy to gain control over Parkway.
However, it is believed that if faced with an attractive counter-bid by Fortis or other parties, Khazanah would not eschew the possibility of cashing out at a handsome profit.
What is more tricky is if the current bid by Khazanah fails. Reliable sources say Khazanah and some other shareholders have grown concerned over the entry of Fortis, which is likely to turn Parkway into an owner-managed entity.
In the past, both TPG and Khazanah were institutional shareholders that left Parkway to be independent professionals.
Fortis meanwhile, are no strangers to controversy. After the Singh family had sold its stake in Ranbaxy to Daiichi, Ranbaxy recorded losses.
Following a two-year investigation, the US Food and Drug Administration banned 30 drugs made at two Ranbaxy plants for fabricating test results, it had been reported. Daiichi has also severely written down its investment in Ranbaxy.
It has also been reported in the Indian media in 2007 that Fortis-controlled Escorts Heart Institute and Research Centre had sacked one of India’s leading cardiologists Dr Naresh Trehan over differing views on the management of the latter.
The media had reported of charges and counter-charges between Shivender Singh, then managing director of Fortis, and Trehan. Trehan later joined Apollo Hospitals.
http://biz.thestar.com.my/news/story.asp?file=/2010/6/2/business/6383625&sec=business
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