Fortis Healthcare Ltd., India’s second-biggest hospital operator, offered about S$3.2 billion ($2.3 billion) for the rest of Singapore’s Parkway Holdings Ltd., topping a partial bid by Malaysia’s sovereign wealth fund.
Fortis said it will pay S$3.80 a share in cash for the 74.73 percent it doesn’t already own in Parkway, Asia’s largest hospital operator. That’s 0.5 percent more than the S$3.78-a- share bid by Khazanah Nasional Bhd., which sought to more than double its stake to 51.5 percent. Parkway shares closed at S$3.57 yesterday and were halted from trading today.
Brothers Malvinder and Shivinder Singh, who run Fortis, are moving to block Khazanah from gaining control of Parkway’s 16 hospitals in Asian countries, where health-care spending is increasing as much as 17 percent annually. The combined entity will have 68 hospitals in eight nations across the region, Parkway Chairman Malvinder Singh said.
It’s possible Khazanah will make a counter offer, said Lim Jit Soon, an equities analyst at Nomura Securities in Singapore. “There are going to be more twists and turns ahead because this is only the second shot,” Lim said in a telephone interview.
Fortis gained 1.6 percent to 154.9 rupees as of 1:43 p.m. in Mumbai trading and has advanced 13 percent this year.
Malvinder Singh said he plans to place Fortis under Parkway and keep Parkway listed in Singapore. It’s premature to comment on whether Fortis will remain listed, he said.
Fortis, which trails Apollo Hospitals Enterprise Ltd. among Indian hospital operators, said it expects merging with Parkway will cut costs through coordinated purchases of medical equipment and drugs.
Parkway’s hospitals attract patients from Indonesia and the Middle East, driving revenue from medical tourism, which Fortis says will reach $1.5 billion globally in 2010. The Gulf states, China, Hong Kong, Indonesia and Thailand offer growth potential for the combined company, New Delhi-based Fortis said.
“We’ll see ourselves extremely well-positioned for growth as we move forward,” Malvinder Singh said at a briefing in Singapore.
Fortis is “very comfortable” with the mix of cash, equity and debt funding it has for the Parkway offer, Singh said, without giving more specific details. Macquarie Group Ltd. and Royal Bank of Scotland Group Plc are advising Fortis.
The offer from Fortis values Parkway at about 27 times estimated 2010 earnings per share. Raffles Medical Group Ltd., Parkway’s biggest Singapore-based competitor, trades at 21 times, according to data compiled by Bloomberg.
Fortis’s offer appears superior to Khazanah’s, said Lynette Tan, who follows small and mid-cap companies at DMG & Partners Securities Pte. in Singapore. Officials at Kuala Lumpur-based Khazanah declined to comment.
“It’s a higher price and secondly it’s a general offer, compared to a partial,” Tan said. “In a general offer, shareholders won’t be left with odd lots which they probably cannot trade for a long time.”
Malvinder, 37, and Shivinder, 34, have a net worth of $3.2 billion, making them the world’s 297th-richest people and India’s 16th-richest, Forbes magazine said in March.
In 2008, the Singh family sold their 35 percent stake in Ranbaxy Laboratories Ltd., India’s biggest drugmaker, to Japan’s Daiichi Sankyo Co. for about $2 billion. Malvinder remained until May 2009 as chief executive officer of the company his grandfather bought in 1952.
“I certainly believe our offer is compelling,” Malvinder Singh said. He declined to comment on a potential bidding war with Khazanah.
“We are giving the flexibility to the shareholders to take the decision that is in their best interest,” Singh said. “If they would like to tender in, we are more than happy to take it. If they would like to stay invested, we’re very happy to have them.”