Khazanah to gain most from listing of IHH Healthcare

NO one would fault the guys at Khazanah Nasional Bhd for feeling somewhat vindicated, perhaps even a little smug, about the impending listing of IHH Healthcare Bhd.
It
was, as some have observed, hard fought, with part of the foundation
laid during Khazanah's battle for control of the then Singapore-listed Parkway Holdings Ltd two years ago.
After a two-month tussle between Khazanah and Fortis Healthcare Ltd,
which belonged to billionaire brothers Malvinder and Shivinder Mohan
Singh, the state investment firm outbid the latter in July 2010 with a
cash offer of S$3.95 per share, or a total of S$3.5bil for all the
shares it did not own in Parkway.
Khazanah had prior to that
owned 25.3% of Parkway, at the time the largest healthcare group by
market capitalisation in Asia ex-China, while Fortis had a 23% stake.
The
win, however, set tongues wagging. Among others, its detractors
wondered aloud whether Khazanah had paid too much for the acquisition,
and how it could possibly add value to what was already Singapore's
largest and most profitable healthcare company.
Recall that it
was Khazanah who made the first move with a partial offer of S$3.78 per
share in May 2010, or S$1.18bil, to lift its stake in Parkway to 51%.
Not
one to give up a good game, Fortis put in a counterbid of S$3.80 per
share the next month, setting the stage for a price war.

[You must be registered and logged in to see this image.] Dual listing:
Najib (left) and Khazanah MD Tan Sri Azman Mokhtar showing the IHH
Healthcare prospectus. The healthcare provider is the first concurrent
IPO on the Main Market of Bursa and Main Board of SGX. – RAJA FAISAL
HISHAN/The Star. In the end, Khazanah upped its offer
to S$3.95, which was a 31% premium to the stock's closing price on May
26, 2010, of S$3.02 before it unveiled the initial offer.
The
price valued Parkway at 39 times the company's earnings in the 2009
financial year (FY09) and 25 times forecast FY10 earnings. This was an
expensive endeavour considering that its peers on the Singapore
Exchange (SGX) were trading at an average price-to-earnings ratio of 23
times for FY09 and 18 times for FY10.
The Singh brothers, who
had bought their stake in Parkway for S$959mil, or S$3.56 per share, in
March that year from private equity firm TPG Capital, pocketed a cool
S$110.8mil in profit and gross proceeds of S$1.12bil from the sale, for
a return on investment of 35%.
Even then, there was talk in the
market that Khazanah had a plan on the table to consolidate its
healthcare assets and eventually relist a larger and much more
attractive Parkway.
And it has been doing just that. After selling a 30% stake in IHH to Japan's Mitsui & Co Ltd
for RM3.3bil in April last year, it revealed in December a deal to buy
60% of Turkey-based private healthcare provider Acibadem Saglik
Hizmetleri ye Ticaret AS.
It had also raised its equity in India's Apollo Hospitals Enterprise Ltd to 11.22% from 8.8%.

[You must be registered and logged in to see this image.] IHH Healthcare chairman Tan Sri Dr Abu Bakar Suleiman at the prospectus launch yesterday. Now
Asia's largest hospital operator, IHH is slated to list on both Bursa
Malaysia and SGX on July 25, in what would be the third largest initial
public offering (IPO) in the world this year after Facebook and Felda Global Ventures Holdings Bhd (FGVH).
It
will also chalk up records for being the largest ever dual listing
between two Asean bourses as well as the first simultaneous dual
listing between Singapore and Malaysia.
Besides that, it
registered the most popular take-up by cornerstone investors of any
recent IPO in the region, with 22 such investors snapping up 1.39
billion, or 62%, of the 2.23 billion shares on offer.
StarBiz reported last month that billionaire T. Ananda Krishnan's Usaha Tegas group, Chua Ma Yu and the Employees Provident Fund (EPF) were among the local cornerstone investors.
It
was said that the EPF was the biggest buyer of a block of 200 million
shares, which represents about 8% of the IPO shares, while sovereign
wealth fund Kuwait Investment Authority was the second largest with 150
million shares or about 6%.
Sources had told StarBiz that
the shares available to cornerstone investors had to be increased from
600 million-800 million to 1.39 billion given the overwhelming demand.
And the icing on the cake Khazanah would realise an 83% jump in the value of its stake in IHH upon listing.
Khanazah managing director Tan Sri Azman Mokhtar
said the state investment company's 48% share in IHH would be worth
RM11bil compared to its equivalent investment cost of RM6bil, based on
the proposed IPO price of RM2.85 per share.
A head of research
at a local bank-backed brokerage reckoned that the stock “should do
pretty alright” at its debut, but expects its performance to mirror Gas Malaysia Bhd's opening rather than FGVH.
“IHH is still in its growth phase and may not be a dividend-yielding stock just yet,” he told StarBiz.