Khazanah may have to bid higher for Parkway

Independent advisor says the per-share offer isn’t so attractive.

Malaysian government investment firm Khazanah Nasional Berhad may have to sweeten its bid to acquire Parkway Holdings, the Singapore company that runs Asia’s largest private healthcare chain. Morgan Stanley, the independent advisor to Parkway, has said the current offer, to buy 313 million shares of Parkway at S$3.78 a share was reasonable, but not “compelling”.

In a circular on Monday, Morgan Stanley said while Khazanah's offer price was much higher than Parkway's average share price in the 12 months preceding the offer, it was just 6.5 per cent above the average price target of S$3.55 set by stock market analysts who cover the company. The appointment of an independent advisor is mandatory under Singapore laws.
 

BIDDING WAR

• S$3.78/share bid is 6.5% above brokers’ average target
• Premium offered is below average for Singapore takeovers
• Fortis shares up 2.6%, Parkway shares down

According to Morgan Stanley, only those shareholders who do not expect a counter-offer or a revised price offer from Khazanah or any other competitor should plan to sell their shares.

India’s Fortis Healthcare Ltd, which holds 25 per cent stake in Parkway, is currently in control of the company. In response to the Khazanah bid, Fortis had stated it was evaluating all options and was yet to finalise its reaction. Industry sources have been expecting Fortis to announce a counter-bid to retain its management control over Parkway.

The circular also stated that two independent directors of Parkway had decided not to tender their shares in the Khazanah offer, as they have an agreement with Fortis which allows it to decide the position these directors will have to take at shareholder meetings. However the director who did not have such a binding agreement with Fortis said he intended to sell his shares and vote in favour of a Khazanah takeover.

Morgan Stanley said their opinion was purely based on financial analysis and did not incorporate any assessment of commercial, legal, tax, regulatory or other matters, including possible synergies highlighted by the Offeror (Khazanah) and the potential impact of the success or failure of the partial offer on Parkway’s joint venture businesses with Khazanah in Malaysia.

Parkway shareholders have until July 8 to accept Khazanah's partial offer, while Singapore Securities’ regulator has given time till July 30 for Fortis to declare its intentions for an alternative bid for Parkway.

Fortis became the largest shareholder in Parkway after it acquired 23.9 per cent stake in it for S$959 million (around Rs 3,000 crore) in May. The company increased its stake to 25.3 per cent through open market purchase of shares later. Khazanah owns 23.3 per cent stake and is the second biggest shareholder in Parkway.

Following the Morgan Stanley circular, Parkway shares fell 0.07 per cent to close at S$3.68, lower than the offer price of S$3.78 on the Singapore Stock Exchange today. Fortis shares rose 3.67 per cent to close at Rs 152.35 on the Bombay Stock Exchange.