SINGAPORE/NEW DELHI Malaysian state investor Khazanah trumped India's Fortis Healthcare(FOHE.BO) in a takeover battle for Singapore's Parkway PARM.SI with an offer that values Asia's biggest listed hospital operator at $3.3 billion.
The deal pitted a state investor and private enterprise in a rare asset tussle and ended two months of sometimes hostile wrangling over the healthcare firm.
Both Fortis and Khazanah had sought to spearhead their expansion in the region's booming healthcare market via Parkway, which runs hospitals in Singapore, Malaysia, India and China.
The deal follows the sale of Australia's Healthscope to private equity firms TPG and Carlyle for $1.73 billion.
Khazanah -- in its biggest acquisition overseas -- said it was offering around S$3.95 ($2.88) per share for all Parkway shares it does not own, or about 76 percent, topping the S$3.80 offered by Fortis, confirming an earlier Reuters story.
For related M&A graphic, click r.reuters.com/jah59m
Fortis, in accepting the Khazanah offer, said it would use the S$116.7 million profit on its Parkway stake to look for other opportunities.
"At the end of the day, you have to take an economic call. You can't take an emotional call on the assets you want to own," Shivinder Singh, managing director and one of the two billionaire Singh brothers who control Fortis told reporters in New Delhi.
Shares of Fortis, controlled by Shivinder Singh and his brother Malvinder, had surged more than 6 percent in Mumbai just ahead of Khazanah's confirmation.
The brothers, heirs to Ranbaxy LaboratoriesRANB which was built by their grandfather and they later sold to Japan's Daiichi Sankyo, have ambitions to build their healthcare business in a series of deals.
Malvinder, who like his brother has an MBA from Duke University's Fuqua School of Business in North Carolina, said Singapore would be the company's hub for international expansion.
TIME TO CASH OUT?
Parkway shares were suspended on Monday pending the announcement by Khazanah and closed at S$3.88 on Friday. The price of S$3.95 would be the highest for its shares since October 2007.
"This is a good price for investors to cash out," said Lynette Tan, an analyst at DMG & Partners in Singapore, referring to the offer price.
"The change in ownership won't make much difference to Parkway's future growth strategy or operations because Khazanah was already a large shareholder."
Nomura Securities says the deal values Parkway at 31 times 2010 earnings against peer Raffles Medical's 22 times.
Malvinder Singh, chairman of both Fortis and Parkway said in a statement the deal took into account all the stakeholders of Fortis. He called the deal a win-win for all involved.
"It was made after careful assessment of the intrinsic value of Parkway and in light of other growth opportunities available to us across the region and globally," he said.
Khazanah said it would try to maintain Parkway's listing on the stock exchange.
Fortis bought a 24 percent stake in Parkway from buyout firm TPG in March for around S$3.56 a share and subsequently added more shares from the open market.
Khazanah, which has a portfolio of $28 billion, is also looking to raise loans through DBS, UOB and OCBC.
It plans to sell Singapore dollar sukuk or Islamic bonds, according to banking sources who could not be identified because the sale is not public.
Yogesh Sareen, chief financial officer of Fortis said the company would be debt-free following the sale of its stake in Parkaway and would have free cash reserve of 9 billion rupees post-Parkway deal.
"The cash will not be kept lying. We will look for acquisition opportunities in South east Asia and the Middle-East," he said.
Deutsche Bank and CIMB were advising Khazanah and Fortis was being advised by Macquarie and RBS. Morgan Stanley is acting as an independent adviser to Parkway. (S$=1.37 Singapore dollar)
(Additional reporting by Kevin Lim, Harry Suhartono and Charmian Kok in SINGAPORE; Editing by Raju Gopalakrishnan and Valerie Lee)
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