At
Singapore-listed Parkway Holdings there is now a battle for control of this key medical tourism player. The saga began in March, when US private equity group
TPG Capital sold its
23.9% stake in
Parkway to
Fortis Healthcare, an Indian hospital chain for
S$959million. Fortis Healthcare has since increased its stake to
25.3% to make it the single largest shareholder of Parkway. But there is another major stakeholder in Parkway, Malaysian government subsidiary
Khazanah Nasional has a
23.8% share through its subsidiary,
Integrated Healthcare. Khazanah recently made an offer to increase its stake to
51%, at a premium price to shareholders. If Fortis do not make a counter-bid, Khazanah wrests control from Fortis. If Fortis makes a counter bid, it will have to be at a very high price indeed, and would enable Khazanah to make a massive profit by selling their shares. There is a third player, the
Government of Singapore Investment Corp (
GIC) with a
6.8% stake .If Fortis opts to make a counter bid for Parkway, it would have to launch a full general offer for Parkway, as Singapore takeover rules do not allow parties who have bought shares in the last six months to carry out a partial offer. That could potentially cost Fortis at least
S$3.1billion to buy out the remaining shareholders in Parkway. Fortis is discussing financing options with GIC, but GIC’s mandate is to invest abroad and this could constrain it from putting its money into a battle for control over a Singapore based company. Though Khazanah’s offer is an attractive one, there is no assurance that it will succeed. Khazanah, has a
60% stake in Pantai Medical, the other
40% is held by Parkway. Fortis has another option, a partial offering, but Singapore’s financial authorities would have to give special permission. Fortis’ investment in Parkway is seen as a starting point for ambitions of rapid international expansion. For both Khazanah and Fortis Healthcare, a majority stake in Parkway Holdings is a good acquisition, as Parkway has 16 hospitals in Asia, with over
3.400 beds throughout
Singapore,
China,
Malaysia,
India,
Brunei, and the
UAE ; and plans to build hospitals in Vietnam and China. Parkway has huge strategic value for Fortis, and losing control over the Singapore-based healthcare chain would constitute a big setback for the Indian healthcare company. Fortis plans to use Parkway as its vehicle to realise the dream of building a leading global healthcare chain. An option for Fortis is to stay invested as a minority shareholder. But unless it is able to arrive at an understanding with Khazanah over management control, it may not make much sense for Fortis to be just a financial investor. Khazanah’s ace is that it has no global healthcare plans, and just seeks to make money from investments, so can play a long-term game. Khazanah’s attempt to raise its holding to 51% is related to its unhappiness that Fortis had the cheek to take control of Parkway, despite only owning a quarter of it, and disagreements over future strategy. Whatever the outcome, Parkway seeks a quick solution, as while it is business as usual at the group, a prolonged shareholder battle would be a distraction for the staff and offer ongoing uncertainty on corporate strategies.
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