Parkway control battle's next phase from Monday

The bidding war between Malaysian sovereign wealth fund Khazanah Nasional Berhad and Fortis, India’s leading healthcare chain, to acquire majority stake in Singapore-based Parkway Holdings is set to enter a new phase.

Monday is when the extended deadline set by Khazanah to buy Parkway shares through a partial open offer ends. Industry analysts expect Khazanah to offer a higher price for Parkway shares than the S$3.78 it has offered for each share, to make its bid attractive. Fortis has countered Khazanah’s partial offer to acquire 51.5 per cent stake through an offer to buy the entire stake in Parkway for S$3.8 a share.

“We expect Khazanah to announce a general offer to purchase Parkway shares for a price close to S$4. Another extension of partial offer or a revision of its partial offer price may not be attractive enough to make shareholders surrender their shares in favour of Khazanah,” said Ranjit Kapadia, vice president, institutional research, of broking firm HDFC Securities. Parkway shares on the Singapore Stock Exchange closed at S$3.89 today, higher than the current offers from Khazanah and Fortis.

Parkway runs Asia’s biggest private healthcare network, spread across Singapore, Malaysia, Brunei, China and India. Majority control in this company is central to the growth and investment plans of both Khazanah as well as Fortis. Khazanah, through its wholly owned subsidiary, Integrated Healthcare Holdings, wants to increase its investments in the healthcare sector in the Asian region and sees Parkway as a prime asset.

Fortis has said its overseas growth plans will be through Parkway and the company promoters, brothers Malvinder and Shivinder Singh, are exploring possibilities of turning Fortis Healthcare into Parkway’s subsidiary, thereby turning Parkway into its mother brand.

“Parkway’s assets are compelling. But a price higher than what has been offered now will turn the bid too expensive for Fortis on a short term. We expect Khazanah to revise its offer price and make it a general offer for all shareholders. Given the deep pockets Khazanah has, one should not be surprised if it is close to S$4 a share, in which case, it will become difficult for Fortis to counter,” said Rahul Gaggar, analyst with Centrum Broking.

Fortis with barely over 25 per cent stake, is the largest shareholder and also enjoys management control at Parkway. Khazanah is the second largest shareholder, with just under 25 per cent. Khazanah’s offer turned less attractive after Fortis Healthcare made a $2.3billion (Rs 10,700 crore) counter-offer to acquire all shares it did not own in Parkway. Fortis became the largest shareholder in Parkway after it acquired a 23.9 per cent stake for S$959 million (Rs 3,000 crore) from US investment company TPG Holdings in May. The stake was later increased to 25.3 per cent through open market purchase of shares.

Parkway Holdings has a network of 16 hospitals with more than 3,400 beds. Besides Fortis and Khazanah, other share holders are investments firms Bank of New York Mellon Corporation, Newton Investment Management and Franklin Resources.