Khazanah to raise Parkway offer

India's Fortis may see the stakes raised soon by its Malaysian rival for the control of...

Written by Agencies | Singapore/mumbai | Published: July 19, 2010 10:37:53 am

The Indian company may see the stakes raised soon by its Malaysian rival for the control of Singapore company Parkway. Malaysian state investor Khazanah may have to pay more than S$4.00 a share for Singapore’s Parkway,or at least 3.1 percent above its share price to ward off rival bidder Fortis Healthcare.

The Malaysian investor is mulling whether to boost its current S$3.78/share partial offer or go all out with a general offer that outbids the S$3.80 offered by India’s Fortis,backed by billionaires Malvinder and Shivinder Singh,sources familiar with the matter said.

Khazanah has extended the date for its $835 million partial offer to double its stake in Parkway to 51.5 percent until July 26,trying to buy time to respond to Fortis’ higher bid.

There is no point doing a partial offer since they have not succeeded in getting shareholder approval,said Lim Jit Soon,head of equity research Southeast Asia for Nomura.

Better to go for full with a higher offer price.

Analysts expect any price above S$4.00 a share should seal the deal for Khazanah.

If Khazanah’s offer is at a substantial premium,Fortis may back out,Sapna Jhawar,analyst at Mumbai-based brokerage Sharekhan.

A source familiar with Fortis said: Anything beyond S$4 a share for Parkway will be stupid.

Parkway’s current price values the healthcare provider at $3.2 billion. The bidding war has pushed Parkway shares above the median target price of S$3.49 by analysts,according to Thomson Reuters data.

THe rivals,almost equal shareholders in Parkway owning 25 percent each,want to use the firm,which runs hospitals in Singapore,Malaysia,India and China,to spearhead their regional expansion in the booming healthcare market.

Many funds are sitting tight,waiting for the next move in this intriguing battle.

We will just sit and watch and do nothing while waiting for Khazanah to make its bid,said the head of research at a European fund that owns Parkway. Valuations are rich but why sell when there’s a bidding war.

The research head asked not to be named due to compliance issues.

HOW HIGH WILL IT GO ?

The question on everyone’s mind is if Khazanah will raise its price to or above S$4 a share,a level that may force Fortis to back off. It certainly has the war chest.

And to add to its buying power,Khazanah,which has a portfolio of $28 billion,is looking to raise loans through DBS,UOB and OCBC.

It also plans to raise Islamic bonds or sukuk,north of S$500 million,according to a source with knowledge of the deal,adding the deal has been delayed for 1-2 weeks. The source declined to be named because of the sensitivity of the matter.

CIMB and DBS are among the banks advising Khazanah on the Islamic bonds,sources said.

UBS’ Jaj Singh,who has a target price of S$4 for Parkway — which values it at 31 times 2010 earnings — ,believes a controlling stake in Parkway should command a premium above his target price.

Nomura analysts said for every S$0.10 per share increase in the offer price,the bidder would require an additional S$85 million for the acquisition.

I don’t think anybody will be interested in prolonging the battle,said Mumbai-based analyst Jhawar. S$4 a share is a fair valuation for Khazanah and anything beyond it would be expensive.

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