Khazanah may have to pay over S$4 a share in Parkway battle

Tuesday July 20, 2010




By SAEED AZHAR and SANJEEV CHOUDHARY





SINGAPORE: Khazanah Nasional Bhd may have to pay more than S$4 a share for Singapore’s Parkway, or at least 3.1% above its share price, to ward off rival bidder Fortis Healthcare.



Malaysia’s government investment arm was mulling over whether to boost its current S$3.78 a share partial offer or go all out with a general offer that outbids the S$3.80 offered by India’s Fortis, backed by billionaires Malvinder and Shivinder Singh, sources familiar with the matter told Reuters.



Khazanah has extended the date for its US$835mil (RM2.7bil) partial offer to double its stake in Parkway to 51.5% until July 26, trying to buy time to respond to Fortis’ higher bid.



“There is no point doing a partial offer since they have not succeeded in getting shareholder approval,” said Lim Jit Soon, head of equity research South-East Asia for Nomura. “Better to go for full with a higher offer price.”



Analysts expect any price above S$4 a share should seal the deal for Khazanah.



“If Khazanah’s offer is at a substantial premium, Fortis may back out,” Sapna Jhawar, analyst at Mumbai-based brokerage Sharekhan.



A source familiar with Fortis said: “Anything beyond S$4 a share for Parkway will be stupid.”



Parkway’s current price values the healthcare provider at US$3.2bil. The bidding war has pushed Parkway shares above analysts’ median target price of S$3.49, according to Thomson Reuters data.



The rivals, almost equal shareholders in Parkway owning 25% each, want to use the firm, which runs hospitals in Singapore, Malaysia, India and China, to spearhead their regional expansion in the booming healthcare market.



Many funds are sitting tight, waiting for the next move in this intriguing battle.



“We will just sit and watch and do nothing while waiting for Khazanah to make its bid,” said the head of research at a European fund that owns Parkway. “Valuations are rich but why sell when there’s a bidding war.”



The research head asked not to be named due to compliance issues.



The question on everyone’s mind is if Khazanah will raise its price to or above S$4 a share, a level that may force Fortis to back off. It certainly has the war chest.



And to add to its buying power, Khazanah, which has a portfolio of US$28bil, is looking to raise loans through DBS, UOB and OCBC.



It also plans to raise Islamic bonds, or sukuk, “north of S$500mil”, according to a source with knowledge of the deal, adding that the deal had been delayed for 12 weeks. The source declined to be named because of the sensitivity of the matter.



CIMB and DBS were among the banks advising Khazanah on the Islamic bonds, sources said.



Nomura analysts said that for every 10 Singapore cents a share increase in the offer price, the bidder would require an additional S$85mil for the acquisition.



“I don’t think anybody will be interested in prolonging the battle,” said Jhawar of Sharekhan. “S$4 a share is a fair valuation for Khazanah and anything beyond it would be expensive.” — Reuters

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