New Delhi: Brothers Shivinder and Malvinder Mohan Singh have responded to the fight between Fortis Healthcare Ltd, promoted by them, and Khazanah Nasional Bhd, Malaysia’s state investment firm, for control of Singapore-based Parkway Holdings Ltd, by getting personally involved in an offer made on Thursday to acquire all of the Singapore company for S$3.2 billion (Rs10,624 crore).
The bid was made by RHC Healthcare Pte Ltd in which Fortis has a 49% stake and the Singhs, 51%.
Photo: Ramesh Pathania; Graphic: Ahmed Raza Khan / Mint
RHC is a special investment vehicle of the family. The Singhs are flush with funds, having sold their stake in Ranbaxy Laboratories Ltd to Japan’s Daiichi Sankyo Co. Ltd for $2.4 billion (around Rs11,210 crore today) in 2008.
In March, Fortis acquired a 23.9% stake in Parkway for S$959 million at a price of S$3.56 per share. It later increased its stake to 25.37%.
In May, Khazanah, which already owned 23% in Parkway, made a bid to acquire an additional 28% stake in the company for $839 million. The Malaysian fund has interests in several South Asian healthcare firms, including India’s Apollo Hospitals, a rival of Fortis.
Thursday’s offer by RHC and Fortis is, at S$3.80 a share, marginally higher than Khazanah’s offer of S$3.78. It is also a 25.8% premium over Parkway’s closing price a day prior to the partial offer made by Khazanah. The difference between the two bids is also that Khazanah’s is partial while RHC has offered to buy out all shareholders of Parkway. This might make the offer more attractive to the board of the Singapore firm, say analysts.
RHC will have to send out the final offer within the next 21 days.
The general offer made by RHC is, however, subject to it increasing its holding to over 50% of Parkway’s outstanding shares, including the 25.37% it already owns. Thus, even though the family has made an offer for 100% of Parkway shares, it only needs a minimum of around 25% more to gain control of the firm in the wake of Khazanah’s offer, which was deemed reasonable, but not compelling by Morgan Stanley, adviser to Parkway.
Of the six Parkway directors who are also shareholders in the company, three have indicated that they will vote against Khazanah’s partial offer in compliance with their “obligation under the FGHL (Fortis Global Healthcare Ltd) agreement” that they signed in March when the Indian firm took a stake in Parkway.
Two other directors said they would vote for Khazanah’s partial offer, while one said he would not vote and would retain his shares.
If the family’s acquisition of Parkway goes through, it intends to make the company its growth vehicle in other markets
“We would like to make Parkway as the brand to enter emerging markets. It will become the mother listed company of the healthcare group, out of Singapore, and there is a strong intent that Fortis would become its subsidiary,” said Shivinder Mohan Singh, managing director of Fortis.
Under Indian laws, Fortis is allowed to invest four times its net worth in an overseas acquisition. As of 31 March, Fortis’ net worth was Rs1,820 crore, which means it can invest up to around Rs7,300 crore. Of the Rs11,000 crore it needs for a 100% stake in Parkway, it has already invested Rs3,000 crore. The rest will come from the Singhs.
“To the point that Fortis can go on investing in Parkway, it will go. Beyond that the family will put money. Now Fortis will have to raise money and how they do that remains to be seen. In all, the entire structure looks complicated at the moment and will stretch Fortis’ balance sheet,” said a Mumbai-based analyst with a foreign brokerage, who asked not to be identified because he is not allowed to speak to the media.
Late last month, Fortis had also deferred a preferential allotment of shares worth Rs380 crore to Government of Singapore Investment Corp. Pte Ltd (GIC). The Singh brothers said that since they were unsure of the investment Parkway would require, the two companies had mutually decided to wait.
“It is possible that GIC will now invest a larger amount in Fortis, which in turn will put that money into Parkway,” said the analyst cited in the first instance.
Shares of Fortis rose 1.22% to close at Rs154.10 on a day when the Bombay Stock Exchange’s Sensex index fell 1.08%. Trading in Parkway shares was halted on the Singapore Stock Exchange in the morning.