Singapore/New Delhi: India’s Fortis Healthcare and its founding family launched a bid valuing Singapore hospital operator Parkway Holdings at $3.1 billion (S$4.3 billion), topping a rival offer by Malaysian state fund Khazanah.
Fortis, which controls just over 25% of Parkway, had intended to build a controlling stake in the firm before Khazanah made a surprise $835 million partial offer in May to lift its stake to 51.5%.
“Fortis is just testing the water with this offer. Had it been serious it could have made an offer Khazanah wouldn’t have been able to match,” said Ranjit Kapadia, an analyst with Mumbai-based HDFC Securities, adding that he expects Khazanah to match this offer.
By pitching a higher offer, RHC Healthcare, 49% owned by Fortis and the remainder by the hospital chain’s controlling Singh brothers, Fortis aims to prevent Khazanah from taking over Asia’s biggest hospital group which runs 16 hospitals.
Both Fortis and Khazanah want to use Parkway, which runs hospitals in Singapore, Malaysia, India and China, to spearhead their regional expansion in the booming healthcare market.
A successful bid by Fortis may also put a question mark on Parkway’s expansion into Malaysia, as most of the Singapore firm’s operations in the country are carried out through Pantai, in which it holds a 40% stake and the balance is held by Khazanah.
Khazanah, which declined to comment on Fortis’ offer, has holdings mostly concentrated in Southeast Asian financial firms, healthcare and telecoms. The fund already owns stakes in healthcare firms across Asia, including Apollo Hospitals, a rival to Fortis in India.
“On the part of Fortis, I think their intention is essentially to get a better exit price,” said Singapore-based UOB Kay Hian analyst Andrew Chow.
Fortis and billionaire Indian brothers Malvinder and Shivinder Singh have already secured funds for the acquisition, said Sachindra Nath, CEO of Religare, which is also controlled by the Singh brothers and is the strategic advisor to Fortis.
RHC Healthcare and the Singh brothers are offering to buy shares they don’t already own in Parkway for S$3.80 a share, or 2 Singapore cents more than the S$3.78 offered by Khazanah.
The offer price is at a slim premium to Parkway’s last traded price of S$3.57. Parkway shares are suspended from trading.
“It’s just the beginning of a bidding war,” said Ambareesh Baliga, an analyst with Mumbai-based brokerage Karvy Stock Broking. “A price of up to S$4.2 would be fair for Parkway.”
Parkway’s prized assets are Singapore hospitals Gleneagles and Mount Elizabeth, whose patients include business leaders and politicians from the region.
With a combined fortune estimated at $3 billion by Forbes magazine -- good for 17th place on its India rich list -- the Singh brothers have the access to capital to challenge the Malaysian fund, although Khazanah has far deeper pockets, with $28 billion in assets.
Malvinder, Fortis’ chairman, had moved to Singapore with his family and took over as Parkway’s chairman.
The offer is conditional on Fortis getting at least 50% of Parkway. Fortis shares rose as much as 3% on Thursday and ended up 1.2%. Trading in Parkway shares were suspended.
“At an appropriate point of time post the offer we will be looking at folding up the Fortis Healthcare entity as the subsidiary of Parkway,” Fortis managing director Shivinder Singh told reporters on a conference call, adding Parkway will become the main vehicle for the group’s expansion in healthcare.
Macquarie and Royal Bank of Scotland are the financial advisers to the offer. Fortis will need to pay S$3.21 billion for the shares in Parkway that it does not already own.
Fortis has lined up a one-year bridge loan of $1.5 billion to back its open offer, according to a banking source. The loan, to be backed by shares of Parkway, is spearheaded by Axis Bank. Royal Bank of Scotland and ING Bank are also working on separate financing for Fortis.
Last week, Fortis said the Government of Singapore Investment Corp (GIC) had decided to defer a preferential investment but the sovereign wealth fund would evaluate participating in broader fund raising by Fortis. GIC holds Fortis convertible bonds.
Fortis said RHC Healthcare hopes to maintain Parkway’s listing status on the Singapore exchange.
Pantai accounts for a quarter of Parkway’s revenue and almost one-third of earnings before interest, tax, depreciation, amortisation and rent, according to Credit Suisse.
CIMB and Deutsche Bank are advising Khazanah and Morgan Stanley is the adviser to Parkway’s independent directors.