Parkway Updates

Although Integrated Healthcare Holdings (Khazanah Nasional subsidiary) launched only a partial offer for Parkway Holding, Parkway’s price action yesterday suggests that Fortis Healthcare would make a counter offer. As a recap, IHH launched a partial offer to acquire 313m Parkway shares (27.66% of shares out) at S$3.78/share in cash for S$1.18B (US$837MM).

The deal is conditional on 50% of Parkway minorities (excluding Fortis Healthcare) accepting the partial offer; if successful, it will raise IHH/Khazanah’s current shareholding of 23.8% in Parkway Holdings to a controlling stake of 51%. As Fortis Healthcare, Parkway’s largest shareholder (25.3%) currently, does not own enough shares to block the deal, the central question here is whether it will launch a counter bid if 50% of shareholders reject the offer.

Fortis’ shareholder Malvinder Singh, is also Parkway’s incumbent chairman since Fortis acquired its stake from TPG in Mar 2010. Under the Singapore Takeover code, Fortis can only make a General Offer because it acquired shares in Parkway less than 6 mths ago. If Fortis is to make a counter bid for the rest of Parkway shares that it does not own (ex Khazanah's existing stake), it would cost Fortis up to S$2.1bn.

According to our channel checks, it may be difficult for India’s Fortis Healthcare to secure the support of GIC to make a counter bid for Parkway Holdings Ltd as the sovereign fund’s mandate is strictly to invest in companies outside the republic. While we do not entirely rule out the possibility of a potential counterbid from Fortis, we think investors should accept Khazanah’s offer or sell in the open mkt should the shares trade near S$3.75 level.