New Delhi: Fortis Healthcare said it plans to raise up to Rs2,750 crore ($585 million) by issuing securities, positioning it for a possible battle with Malaysia’s sovereign wealth fund for Singapore’s Parkway Holdings.
Fortis owns roughly a quarter of Parkway and had intended to build a controlling stake before it was surprised last month when Malaysia’s Khazanah offered $835 million to lift its stake to 51.5%.
“This means Fortis is keeping the warchest ready if it has to make a counter offer,” said Ranjit Kapadia, an equities analyst with HDFC Securities, adding it was not clear whether or not Fortis will actually make an offer.
The hospital chain also said its board approved increasing its borrowing limit to Rs6,000 crore.
Fortis, controlled by billionaire brothers Malvinder and Shivinder Singh, has been expected to launch a counterbid for Parkway, which has a market value of $3 billion.
“This has raised the chances of a counterbid,” said Sapna Jhawar, an analyst with Mumbai-based brokerage Sharekhan.
Malvinder Singh, 37, had moved to Singapore to become chairman of Parkway, Asia’s biggest listed hospital operator, and Fortis had hoped to use the company as a springboard for overseas expansion.
Contacted by Reuters in Singapore, he said he had no comment beyond the company’s statement.
“Today’s resolutions are enabling resolutions, which will give the company the ability to raise capital as well as debt as required at the appropriate time, in order to fuel future growth,” New Delhi-based Fortis said in a statement.
Shares in Fortis were up 0.3% on Wednesday, while Parkway shares were 1.6% higher at S$3.77 a share in Singapore, just below Khazanah’s bid of S$3.78.
HDFC’s Kapadia said Fortis would need to offer a premium of at least 6 to 7% above Khazanah’s offer to win over Parkway shareholders.
“A counter offer by Fortis will stretch its balance sheet and it will be negative for its shareholders,” he said.
Rich and Richer
While the Singh brothers, who sold their controlling stake in Indian drugmaker Ranbaxy Laboratories two years ago to Japan’s Daiichi Sankyo, have a fortune estimated by Forbes at $3 billion, they face a $28 billion giant in Khazanah.
Fortis had a debt to equity ratio of 2.2 times at the end of March, which it said during a recent briefing that it planned to reduce to 0.67 times at the end of June.
Sharekhan’s Sapna said a deal for Parkway is strategically attractive but will stretch Fortis’ balance sheet, and said Fortis would need to offer at least a 10% premium.
“Fortis may partner with some other private equity firm to meet the shortfall in its funds required for Parkway acquisition,” she said.
Also on Wednesday, Fortis shareholders approved an earlier plan to issue roughly 22.35 million shares on a preferential basis to a unit of the Government of Singapore Investment Corp (GIC) at Rs170 each, to raise Rs380 crore.
Some Parkway investors appear sceptical that a counterbid is imminent, as recent transactions on the open market have shown. For example Pua Muay Kiah, a director of Parkway College of Nursing & Allied Health, a subsidiary of Parkway, sold 20,000 shares at S$3.72 a share, according to a filing on Wednesday.
Similar sales in the open market have taken place since Khazanah’s bid.