Game changer in battle for Parkway

Tuesday July 27, 2010




By ANITA GABRIEL

anita@thestar.com.my





Khazanah raises bid while India’s Fortis bows out



PETALING JAYA: In a highly anticipated tit-for-tat move to wrest control of Singapore-listed Parkway Holdings Ltd, Khazanah Nasional Bhd yesterday sweetened its offer for the healthcare provider to a voluntary general offer (VGO) of S$3.95 cash per share – 4.5% higher than its original partial offer of S$3.78 a share.



The exercise worth about S$3.5bil pips Fortis Healthcare Ltd of India’s counter offer (to Khazanah’s original bid) of S$3.80 per share for Parkway shares made on July 1.



“If our voluntary general offer is successful, then we will be able to achieve the vision we outlined when we launched our partial offer – to create Asia’s premier regional healthcare platform,” said Ahmad Shahizam Mohd Shariff, director of Integrated Healthcare Holdings Ltd (IHHL), a wholly owned Khazanah company undertaking the exercise.



Khazanah revealed the much improved offer on the day its original partial offer came to a close yesterday. The only condition attached to the VGO to succeed is receiving sufficient acceptances which will result in IHHL holding more than 50% of Parkway shares in issue. As of yesterday, IHHL and parties acting in concert with it held some 23.9% interest in the healthcare group.



Since March this year, Khazanah and Fortis Group, owned by India’s billionaire Singh brothers – Malvinder and Shivinder Mohan Singh – have been locked in a heated battle for control of Parkway.



Marking an end to the clash that was played out across the causeway for months and almost sealing the deal for Khazanah, Fortis announced yesterday that it has come to a “mutual undertaking” to tender its entire stake of 24.9% in Parkway to Khazanah under the VGO.



“The undertaking from Fortis has changed the dynamics of this battle. It’s now more or less a done deal for Khazanah. The danger of this bidding war getting out of hand is no longer there and the outcome is more conclusive and clear for other shareholders,” an analyst said.





Under the agreement between both parties, which is believed was inked over the weekend, Fortis has agreed that Malvinder, Shivinder, Sunil Godhwani and Balinder Singh Dhillon – all four were appointed to the board of Parkway shortly after Fortis’ entry into Parkway in March – will resign from the board as well as other committees of Parkway. In line with that, Fortis has also withdrawn its voluntary general offer for Parkway shares with immediate effect.



The offer price of S$3.95 a share represents a price/earnings of 39 times Parkway’s FY09 earnings and 25 times prospective earnings, compared with the peer average on the Singapore stock exchange of 23 and 18 times respectively, which brings up another question: Could Khazanah be over-paying for this asset?



“Khazanah has its own threshold. This offer price falls within that. Furthermore, Khazanah has been in Parkway for a while and so it understands the numbers quite well. It would have been more costly and less certain if Fortis had held out.



“This has now become a significant business in Khazanah’s portfolio,” an observer said.



Not many appeared surprised by Fortis’ move to accept Khazanah’s offer although some had expected it to hold out for more. After all, Fortis is bowing out of the fight for Parkway with a handsome gain of over S$110mil over its investment.



“This is not pure profit though as there are other costs that Fortis has to fork out, like financing cost, commitment fees and so forth. But still, it’s a lucrative investment,” an analyst said.



Based on Fortis’ entry level for the original purchase of the 23.86% stake and subsequent market purchases of Parkway shares, a Fortis spokesperson said the exit price represented an annualised ROI (return on investment) of 35% for Fortis.



“Our decision to exit our investments took into account the interest of all stakeholders of Fortis. It was made after careful assessment in light of other growth opportunities available to us across the region and globally,” Fortis chairman Malvinder, who is also Parkway chairman, said in a statement yesterday.



“We hope to re-invest the value unlocked from this experience to the advantage of our stakeholders, and to support our vision to become a global healthcare provider.



“We are long-term players in the healthcare business and we understand this business,” he said, adding that the group would study the secondary listing of Fortis on the Singapore exchange.



The closing date for Khazanah’s VGO is Aug 16, 2010. Khazanah said it intended to maintain the present listing status of Parkway.
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