Khazanah's Parkway offer not compelling: Morgan Stanley

The Malaysian sovereign fund Khazanah's offer to pick a majority stake in the Singapore-based healthcare chain Parkway, controlled by Fortis Healthcare, is reasonable but not compelling, Morgan Stanley has said.

According to Morgan Stanley, the independent financial advisor to Parkway Holdings, Khazanah's partial offer price represents "a premium of approximately 6.5 per cent to the average broker research price target of 3.55 Singapore dollar".

"Based on and subject to the foregoing, we are of the opinion that from a financial point of view...Although the value implied by the offer price is reasonable, the offer price is not compelling in the context of a partial offer involving a change of control," the investment firm said in a circular to the shareholders of Asia's largest listed hospital chain.

Morgan Stanley's opinion indicates that Khazanah will have to sweeten the $835-million partial offer, say analysts.  "This indicates that Khazanah might have to revise the offer upwardly. However, this advise is based on certain ratings and research reports by brokers only, it (Morgan Stanley) has not done any due diligence and detailed analysis," HDFC Securities vice-president for institutional research Ranjit Kapadia told PTI.
    
Fortis spokesperson declined to comment.
    
Meanwhile, Morgan Stanley today purchased another 39,000 shares of Parkway taking its total holding to 5.38 lakh shares, still under 1 per cent stake. It has been been buying shares of Parkway through its investment arm FrontPoint Management.
     
Parkway is at the centre of a probable bidding war between the Singh family promoted Fortis Healthcare and Khazanah. Fortis and Khazanah are the two largest stakeholders in Parkway with 25.3 per cent and 23.9 per cent stake, respectively.
    
In May, Khazanah had launched a $835-million (about Rs 3,950 crore) partial offer to increase its stake in Parkway.
    
In March, Fortis had acquired 23.9 per cent stake in Parkway for $685.3 million (nearly Rs 3,100 crore) from the US firm TPG. Khazanah's offer is being made at 3.78 Singapore dollar a share by its group company Integrated Healthcare Holdings and through the offer aims to increase its holding to 51.5 per cent.