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| Khazanah's bid to control Parkway Holdings to rule Fortis-Apollo battle |
| P B Jayakumar & Joe Mathew / Mumbai May 28, 2010, 01:02 IST |
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Malaysian sovereign fund Khazanah’s bid to control Parkway Holdings, if successful, will play a key role in the battle between Prathap C Reddy-controlled Apollo Hospitals and Singh brothers’ Fortis Healthcare to emerge as the largest hospital chain in Asia.
While Apollo’s technical expertise would supplement Khazanah’s aggressive attempts to build a greater presence in the Asian healthcare space, a loss of management control over Parkway would compel Fortis to redraw its Parkway-linked international growth plans, said industry watchers.
While Apollo and Fortis were tight-lipped about Khazanah’s bid to control Parkway, the fund’s arm — Integrated Healthcare Holdings — declared its plans to consolidate its healthcare investments. “The group will consolidate Khazanah’s existing stakes in Parkway, Pantai, Apollo, and IMU to become Asia’s premium regional healthcare platform,” Ahmad Shahizam Mohd Shariff, director of Integrated Healthcare (which has offered to acquire Parkway), said in a statement, while announcing the offer.
Analysts said Apollo could be the right partner for the sovereign fund to fuel its ambitions in the healthcare space. Since 2005, Khazanah has been a shareholder in Apollo and holds around 13 per cent stake. On its part, Parkway Holdings has a joint venture with Apollo, which has set up a hospital in Kolkata.
The Reddys have another Malaysian connection. In 2005, Maxis Communications, Malaysia’s leading mobile phone company, and the Reddys had teamed up to buy mobile-phone operator Aircel for $1.08 billion (over Rs 4,000 crore).
News agency Reuters, without quoting any source, today said the Apollo Enterprise was willing to participate with the fund in expanding in Asia.
Malvinder Mohan Singh, chairman of Parkway, had seen Fortis’ alliance with Parkway as a significant step in Fortis’ international foray. “Parkway’s strong presence in Malaysia, with the Pantai Group of Hospitals, gives us great confidence. This acquisition will significantly expand our footprint across the region and place us strategically for geographical and clinical leadership in Asia, a big step closer to our vision of establishing a global healthcare delivery network,” Singh had said at the time of acquiring strategic stake in Parkway two months ago.
Fortis promoters’ plan to synergise the strengths of both institutions might not materialise, if the Singhs lose management control over Parkway. “The valuation of Parkway at $1 million a bed was itself considered to be on the higher side. The only logic for that was the long-term growth opportunities Fortis saw through the synergy. If Fortis loses management control, it will affect their plans,” Muralidharan Nair, partner, life science, Ernst & Young said.
Malvinder Singh and Shivinder Singh, sitting on a cash reserve of over Rs 10,000 crore from the sale of Ranbaxy Laboratories, have aggressively grown, mainly inorganically, in the past two years to displace Apollo as the largest healthcare company in India.
But, analysts said a counter offer by Fortis was going to cost upwards of Rs 4,000 crore. This will put pressure on the company’s domestic plans, Nair said.
While the almost three decade-old Apollo Hospital has over 8,500 beds in over 50 hospitals, the less than a decade old Fortis Healthcare has emerged as the largest player in Asia, with over 10,000 beds.
While Malvinder Singh became the chairman of Asia’s largest healthcare chain Parkway Holdings, by acquiring 23.9 per cent stake for close to Rs 3,000 crore, Fortis Healthcare even managed to acquire the cream of 10 hospitals of Habil Khorakiwala-owned Wockhardt Hospitals.
While the Singh brothers are buying hospital chains and growing at a rapid pace, growth for Apollo Hospitals has been confined largely through greenfield expansions. Apollo’s attempt a few years ago to acquire a large hospital chain in London did not succeed due to difference in valuations.
Industry experts said if Khazanah’s surprise move succeeds, Apollo’s links with the Malaysian sovereign fund could help it regain its status as the largest healthcare chain in Asia.
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