Morgan Stanley report ups ante for Khazanah in Parkway bid

Morgan Stanley report ups ante for Khazanah in Parkway bid

Singapore / New Delhi: An independent adviser to Parkway Holdings said on Wednesday that Malaysian sovereign fund Khazanah’s $835 million partial takeover bid for the Singapore healthcare firm was not compelling, putting pressure on Khazanah to up its offer.

Morgan Stanley said the state investor’s offer price of S$3.78 ($2.72) was reasonable “but not compelling", adding “there is no certainty that shareholders will receive the offer price."

Khazanah said in May it intended to raise its stake in Parkway, Asia’s largest healthcare operator by market capitalisation, to 51.5% from around 24%, pitting it against India’s Fortis, which currently controls Parkway with about 25% of the shares.

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Fortis has until 30 July to state whether it intends to make an alternative bid for Parkway, Singapore’s securities regulator said last week.

Morgan Stanley said while Khazanah’s offer price of S$3.78 ($2.72) was much higher than Parkway’s average share price in the 12 months preceding the offer, it was just 6.5% above the average price target of S$3.55 set by analysts covering the stock.

Morgan Stanley noted Khazanah was only making a partial bid for 313 million shares, or about 27.6% of Parkway’s total issued shares.

“The premia implied by the offer price are below the average and median premia over 1-month, 3-month and 6-month periods for selected Singapore precedent offers involving the acquisition of controlling stakes since 1 January 2007," Morgan Stanley said.

Parkway shares were down 1.6% at S$3.69, below Khazanah’s offer of S$3.78, while Fortis shares were up 2.55% at mid-morning, defying a negative Mumbai market.

A rise in Fortis shares may not necessarily be linked to the Morgan Stanley report, said Sapna Jhawar, an analyst with Mumbai-based brokerage Sharekhan.

“The market is betting on Fortis making a counterbid. The long-term advantage of owning Parkway outweighs short-term difficulties for Fortis," Jhawar said.

Parkway shareholders have until 8 July to accept Khazanah’s partial offer although the Malaysian sovereign fund is likely to extend the deadline amid reports that Fortis is lining up a counter offer.

Morgan Stanley’s advice was contained in a report to shareholders sent out by Parkway’s independent directors. According to the bank, brokers have price targets of between S$2.80 and S$4.03 a share for Parkway.