Singapore/Kuala Lumpur: Malaysian sovereign wealth fund Khazanah launched an $835 million bid for control of Parkway Holdings, potentially pitting it against India’s Fortis Healthcare in a battle for Singapore’s largest private healthcare provider.
The surprise offer, which aims to lift Khazanah’s stake in Parkway to 51.5%, could either kick off a takeover fight for the medical firm which operates 16 hospitals in Singapore, Brunei, Malaysia, India and China or force Fortis to cash out.
Fortis shares jumped 6% in Mumbai after the announcement, indicating that markets expect Indian billionaire Malvinder Singh, whose family controls Fortis, to sell out.
“Market is betting that they would be exiting at profit,” Jagannadham Thunuguntla, equity head at SMC Capitals in New Delhi, said on Thursday.
“If Fortis wants to go ahead, then naturally they will have to write a big cheque.”
Khazanah’s offer comes just two months after Fortis, which runs hospitals in India, bought a 23.9% stake in Parkway from US buyout firm TPG for $685 million.
Fortis’ stake has since risen to 25%. Fortis had said in March it had no immediate plans to raise its stake and would work with Parkway to expand across the region.
Singh also became Parkway chairman.
Singh, the chairman of India’s Religare Enterprises Ltd stepped down from the financial services group in April to focus on his expanding healthcare business.
Khazanah is offering S$3.78 a share to raise its stake from nearly 24%, higher than what Fortis paid in March, when its deal valued Parkway at S$3.56 a share.
This deal will be Khazanah’s biggest acquisition outside Malaysia, according to Thomson Reuters data.
Spokeswomen for Fortis and Parkway had no immediate comments on Khazanah’s offer.
“Khazanah has identified healthcare as one of the core areas that they want to go into,” said Ang Kok Heng, chief investment officer at Kuala Lumpur-based Phillip Capital.
In 2006, Khazanah bought into hospital operator Pantai Holdings, which has a network of nine hospitals throughout Malaysia. “This offer shows that they’re moving towards that same direction,” Ang said.
The sovereign wealth fund holds a stake in Fortis’ rival Apollo Hospitals, India’s largest hospital chain. Apollo shares were up 6%.
Khazanah is planning its first Singapore dollar bond issue to raise between S$300-500 million, said IFR, a Thomson Reuters service.
The Malaysian fund’s bid for Parkway comes a week after the leaders of both countries agreed last week to resolve long-standing disputes over land and water that have plagued ties for the past 20 years.
Under one of the agreements, the two countries said the Malayan Railway land will be developed by a 60:40 joint venture between Khazanah and Singapore state investor Temasek.
In March, Temasek’s subsidiary ST Telemedia bought a $300 million stake in Malaysia’s U Mobile Sdh Bhd.
The bid by Khazanah’s Integrated Healthcare unit is a 25% premium over Parkway’s last traded price. If the offer is accepted, it will pay S$1.18 billion ($835 million) to raise its Parkway stake to 51.5%.
CIMB and Deutsche are Khazanah’s financial advisers.
Khazanah said the group plans to consolidate its existing stakes in Parkway, Pantai, Apollo and IMU to become Asia’s premium regional healthcare platform.
Trading in Parkway shares was suspended in Singapore. Parkway shares have risen 3.4% so far this year, outperforming a 7% drop in the broader Singapore Straits Times Index.