New Delhi: Brothers Malvinder and Shivinder Mohan Singh withdrew from the battle for Singapore-based healthcare chain Parkway Holdings Ltd, agreeing to sell their 25% stake to Malaysian state fund Khazanah Nasional Bhd for a premium over the price they had bought it for.
The Singhs stand to make an estimated $85 million (around Rs399 crore) from the trade, besides having gained information about expansion opportunities during their Parkway stint.
“We are evaluating these now and can now focus on them. We will continue to identify other exciting opportunities,” Malvinder Mohan Singh said at a press conference in Delhi.
On Monday, as Khazanah converted its partial offer into a general offer for all of Parkway at S$3.95 (around Rs136) per share, the Singh-family promoted Fortis Healthcare Ltd announced the divestment of its stake to Khazanah.
The Singhs are evaluating the listing of Fortis on the Singapore Stock Exchange. News of the withdrawal from Parkway triggered a rise in Fortis’ shares by 2.93% to Rs156.30 on the Bombay Stock Exchange. The exchange’s benchmark Sensex index fell 0.61% to 18,020.05 points.
Fortis had acquired a 23.9% stake in Parkway from investment firm TPG Capital Lp at S$3.56 per share in March, and additional shares from the market at S$3.22 apiece. Its total investment in Parkway came to around S$3.54 per share.
Khazanah sparked off the takeover battle in May when the Malaysian sovereign wealth fund’s unit made a partial offer for an additional 28% stake to add to its existing 23.32% holding in Parkway. The offer price was around 6% higher than the price Fortis had paid.
On 1 July, the Singhs, through special investment vehicle RHC Healthcare Pte Ltd, countered the partial offer with a general offer of its own, priced at S$3.80 per share, offering to pay S$3.2 billion for all of the shares in Parkway. On Monday, the day its partial offer came to close, Khazanah struck back with the general offer for Parkway, 4% higher than the Singhs’ offer price and 4.5% higher than its own partial offer price.
“Khazanah and Fortis came to an understanding. The decision was driven by key considerations,” said Malvinder Mohan Singh, chairman of Fortis. Singh said that every asset had a value and their investment in Parkway had come to a point where even the general offer of S$3.80 per share was a “stretch”.
This is not the first time the Singh brothers have exited profitably from their investments. In 2008, they sold their stake in Ranbaxy Laboratories Ltd to Japan’s Daiichi Sankyo Co. Ltd for $2.4 billion. In April, the brothers stepped down from the board of their financial services firm Religare Enterprises Ltd.
A Mumbai-based analyst with a brokerage firm, who did not want to be identified, said the Khazanah offer allowed the Singhs to come out on top.
“Even the S$3.56 they paid initially for the stake in Parkway was overvalued. They over-invested at the time of the first bid itself,” he said. “They are lucky they got out this time. The stock movement shows investor sentiment. People are relieved.”
The Singhs’ opportunity to exit came over this weekend. Khazanah and Fortis had been in discussions for the past three months, with no amicable resolution in sight. But when Khazanah informed Fortis of its intent to make a general offer, negotiations resumed.
“Advisers on both sides were looking for an amicable solution. Once negotiations began, Khazanah offered a valuation of S$3.95 per share and that looked attractive,” said an executive closely related to the deal from Fortis’ side. He did not want to be identified.
Another executive closely associated with the Indian company added that at the time it made the general offer, Fortis had a price in mind that it would not go beyond. “Khazanah being a state fund doesn’t have to worry about funding. But we have to make sure it makes business sense for Fortis and is viable for shareholders,” he said. “Fortis is not the loser, but, in fact, has made a very sensible move.”
Sachindra Nath, group chief executive officer at Religare Enterprises, which was advising Fortis on the transaction, said: “Fortis’ advisers were looking for a solution so that the stress is taken off from the company. So this deal was mutually agreed upon.”
Meanwhile, the Singhs assured investors that Fortis’ growth strategy would remain the same and Singapore would still be at the centre of its expansion. Only the “vehicle to grow will be different”.
“We hope to have a dual listing to enable our vision of being a pan-Asian player,” said Malvinder Mohan Singh.
Singh had relocated to Singapore for the Parkway acquisition. He will remain there and drive the international growth of the company.