Parkway Holdings playing hardball

Last week, Parkway released its response to Khazanah Nasional Bhd.’s $835 million acquisition bid: a resounding no. The news came one month after the $25 billion Malaysian SWF first announced its intention to raise its stake in Parkway Holdings. At the time, Khazanah offered a 25% premium over Parkway’s latest closing price for a stake that would give it majority control of Parkway by investing S$1.18 billion ($835 million) – boosting its holding from 23.5% to 51.5%. However, a circular written by Parkway deal advisor Morgan Stanley said, “Although the value implied by the offer price is reasonable, the offer price is not compelling in the context of a partial offer involving a change of control.”

Days later, Fortis Heathcare also hit a snag of its own as the Government of Singapore Investment Corp. (GIC) said it would defer its $82 million preferential investment in Fortis. Fortis had looked to GIC’s aid in order to take majority stake in Parkway as it would have experienced difficulty fronting the capital to compete with Khazanah on its own. Reports suggest GIC pulled its preferential investment because it did not want to be seen as publicly battling with another SWF.

Activities surrounding Parkway’s acquisition began in March when TPG Capital exited its 23.9% stake in the company. Its shares were picked up by Fortis for $685.3 million, ending Khazanah’s title as the largest shareholder.

Anil Thadani, the director of Symphony International Holdings Ltd., which previously owned a stake in Parkway, concurs that Khazanah’s bid leaves aspects to be desired, but that the SWF is a crucial partner for Parkway that can help it expand in key areas. He points out that Khazanah owns 60% of Parkway’s Malaysian Pantai hospitals business, which is a significant contributor of Parkway’s profits, based in a market where a lot of Parkway’s future growth potential lies. Additionally, as Khazanah is a key investor in healthcare firms such as Apollo, Pantai and IMU, the SWF plans to consolidate its regional holdings with Parkway to create Asia’s biggest integrated healthcare provider.
“Khazanah has a strong Indian healthcare connection too - I might even say, better than what Fortis brings to the table.”

Thadani added that Parkway may be leaning on Morgan Stanley’s advice because keeping its stance open-ended may give it the opportunity “to cash in take some profit with a portion of ones shareholding, while still remaining a shareholder with the balance of the shares.” 

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• Topics
• Southeast Asia
• Healthcare
• Buyouts
• GIC Private
• Symphony Asia Holdings
• Anil Thadani