Khazanah wins bidding war for Parkway

OCBC Investment Research advised shareholders to accept Khazanah's S$3.95 per share offer, valuing Parkway at S$4.5bln.

Consistent with OCBC Investment Research's view in its 2 July report, Integrated Healthcare Holdings (IHH, a unit of Khazanah Nasional), on Monday revised its partial offer into a S$3.5b voluntary cash general offer (GO) for all shares in Parkway Holdings. The offer price of S$3.95 per share values Parkway at S$4.5b, and represents a 4.5% and 1.8% premium to its partial offer price of S$3.78 and the last transacted price, respectively.

Rival bidder Fortis Healthcare, through its 49%-owned RHC Healthcare, had given an irrevocable undertaking to unconditionally withdraw its general offer and to tender its entire 24.9% stake in Parkway in acceptance of IHH's revised offer, after "careful assessment in light of other growth opportunities available" to Fortis. In addition, Messrs Malvinder Mohan Singh and Shivinder Mohan Singh will resign as directors and from all committees of the group.

The GO is conditional upon Khazanah receiving valid acceptances which will result in it holding shares carrying more than 50% of the voting rights attributable to the issued shares in the group. As such, shareholders have the flexibility to realize their entire investments for cash or realize part of their investments and continue to participate in Parkway's growth as part of the leading integrated Pan Asian healthcare services provider. OCBC Investment Research notes that IHH currently holds 23.7% stake in Parkway (23.9% including related parties). With support from Fortis and valid acceptances of 0.3% in relation to its partial offer (which had not been withdrawn), the research group estimate that Khazanah would require a mere 2% acceptances from remaining shareholders for the offer to go through - almost a done deal in OCBC Investment Research's view.

Khazanah management reiterated its view that a controlling interest in Parkway will help to enhance its presence in the healthcare industry in Asia, strengthen its commitment to Parkway and put it a step ahead towards building an integrated regional healthcare platform. In addition, it intends to maintain the present listing status in Parkway.

OCBC Investment Research view the offer positively as it provides a good opportunity for shareholders to make a full exit. The offer price, which implies a 38.9x core FY10F EPS (vs. its five-year average P/E of 27.5x) and surpasses Fortis' offer price of S$3.80, is attractive. In view of the high possibility that the offer becomes unconditional and in the absence of a competing offer, the research group advise shareholders to accept the offer.