Fortis Healthcare promoter Malvinder Singh?s dream of developing a unique global healthcare model through the Singapore-based healthcare firm Parkway Holdings has come under challenge. Khazanah Nasional Bhd, an investment arm of the Malaysian government, on Thursday made a $835-million offer to raise its stake in Parkway Holdings to 51% from the current 23%. Interestingly, the offer received the support of the Reddy-family promoted Apollo Hospitals Enterprises Ltd (AHEL), in which Khazanah holds 13%, opening the possibility of a prolonged bidding war.
?AHEL has indicated its support for Khazanah?s integrated healthcare strategy for a large prominent role in Asia?s larger healthcare player and has indicated its willingness to participate with Khazanah in achieving a greater penetration in the Asian Region,? said an Apollo statement issued late in the evening.
Malvinder Singh declined to comment on Khazanah?s offer or Fortis?s strategy as he took off for Singapore on Thursday midnight.
While Khazanah plans to consolidate its existing stakes in Parkway, Pantai, Apollo and IMU to become Asia?s premium regional healthcare platform, the Fortis-Parkway deal last month had dislodged Apollo from its premier number one perch as Asia?s largest hospital chain. Interestingly, Apollo Hospitals board will meet on Friday to consider a stock split. Sources said Khazanah and Apollo could strengthen their ties if the the former ends up acquiring the controlling stake in Parkway, which would draw clear lines of battle.
Sunita Reddy, director (finance) Apollo Hospitals Group told FE; ?We would try to explore the synergy between the Khazanah and Apollo group without diluting our identity. However, there will not be any equity dilution on our part in any of our ventures, though they have been holding stake in our group for past several years.?
If Khazanah?s offer is accepted, Malvinder Singh?s Fortis, which currently has slightly over 25% in Parkway, would no longer remain the majority shareholder. It may also lead to a situation in which Singh, chairman of the Parkway board at present, may have to relinquish the position.
After Khazanah made the offer at a price that involved a 25% premium over the previous closing price of Singapore $3.02 for Parkway, Fortis?s stock zoomed 7.34% on the BSE to close at Rs 149.85%. Apollo shares ended 9.4% higher on the BSE.
Parkway shares on the other hand were suspended from trading in Singapore. The scrip has risen 3.4% so far this year, outperforming 7% drop in the broader Singapore Straits Times Index. The development, however, is not the end of the road and Fortis has multiple options to choose from. It could opt to tender its shares to Khazanah which is offering Singapore $3.78 a share for 31 crore shares. This is at 6% premium over the price at which Fortis acquired the Parkway shares. This would mean a gain of around Rs 200 crore for Fortis. The second option is to make a counter-offer at a higher price to the shareholders to keep alive plans of branching out globally through Parkway without much interference. Just before leaving for Singapore to take charge at Parkway in April, Malvinder Singh had told FE that he could consider raising Fortis?s stake in Parkway. He was responding to a specific query on whether it was logical to have a higher stake in a company through which he intended to fulfill his global aspirations. On Thursday, a Fortis spokesperson said, ?At this time we would not like to comment on this matter?.
A gain of Rs 200 crore does not appear lucrative enough for the former Ranbaxy promoter, who made a fortune of Rs 10,000 crore by selling the family?s stake in Ranbaxy Labs to Japanese drugmaker Daiichi Sankyo in 2008. That money still remains largely unspent. Analysts rule out the pure monetary gain option. ?If at all Fortis takes the extreme decision of exiting Parkway, it wouldn?t be for monetary gains. Also, in a way Khazanah?s offer has revalidated Fortis?s decision,? said an analyst.
Also, Fortis had said in March it planned to fund the Parkway deal through the remainder cash of the rights issue last year and a fresh issue of equities and currency bonds. A few days back Fortis announced its plan to raise $185 million through a preferential allotment of shares and foreign currency convertible bonds.
Fortis said it would raise about $85 million by issuing 22.35 million shares at Rs 170 each on a preferential basis to the private equity and infrastructure arm of Singapore?s state investment firm, GIC Special Investments Pte Ltd. It also added that it will raise up to $100 million through foreign currency convertible bonds of five-year maturity.