Tuesday June 1, 2010

Tough for GIC to fund Fortis bid for Parkway


PETALING JAYA: It will be difficult for India’s Fortis Healthcare Ltd to secure the support of Government of Singapore Investment Corp Pte Ltd (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, sources said.

GIC declined comment on this issue. News reports in the Indian media stated that Fortis has secured the “tacit support of GIC” to make a counter-offer for Parkway.

GIC bought a 6.5% stake in Fortis in early May for US$85mil and invested a further US$95mil through convertible foreign currency bonds issued by Fortis. At the current price, a conversion of those bonds will increase GIC’s holding in Fortis to over 13%.

“But for GIC to be seen as helping Fortis to buy over Parkway, a Singapore-based and listed healthcare group, it would run counter to the fund’s mandate of only investing out of Singapore,” said a party familiar with the situation.

To recap, last week Khazanah Nasional Bhd’s Integrated Healthcare Holdings Ltd has made a partial offer for Parkway.

Fortis currently has a 25.3% stake in Parkway and plans to use the company as a vehicle to realise its dream of building a leading global healthcare chain.

Integrated Healthcare together with parties acting in concert have a 24.1% stake and would effectively control Parkway with a 51.5% stake should the offer be successful.

Singapore-based analysts told StarBiz they have not heard of any counteroffer nor if GIC would fund any counteroffer.

The analysts were also not clear if institutional shareholders were inclined to accept the offer by Khazanah.

However, at least two research houses said the offer by Khazanah was fair and hence recommended shareholders to accept it.

“We expect possible counter offers from Fortis and remain negative on the deal as this could result in aggressive bidding by both Khazanah and Fortis, driving Parkway’s share price ahead of its underlying business fundamentals,” wrote Yew Kiang Wong, an analyst with CLSA in Singapore and said investors should sell.

Su Tye Chua, an analyst at Credit Suisse in Singapore, wrote in a report yesterday: “We do not rule out a potential counterbid (from Fortis) but given the strong outperformance of Parkway’s shares, limited near-term catalysts and significantly reduced liquidity, we think investors should accept Khazanah’s offer, should the shares trade near S$3.75 each.”

Integrated Healthcare appointed DBS Bank Ltd, Oversea-Chinese Banking Corp and United Overseas Bank Ltd as joint lead arrangers of financing for the Parkway offer.

Parkway’s share price jumped 22.85% from its closing price of S$3.02 on May 26 to close at S$3.71 yesterday. For the year, it is up 26.62%.

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