Khazanah in 'wait and watch' mode; extends offer period for Parkway to 26th July

In the war between Fortis Healthcare and Khazanah for Parkway, the Indian company will release its offer document to shareholders later this month. While extending its offer period, the Malaysian sovereign fund is busy scouting for money

Khazanah Nasional Berhad (Khazanah), the investment-holding unit of the Malaysian government, has preferred to go in for a 'wait and watch' mode in its battle with India Fortis Healthcare Ltd for controlling Parkway Holdings Ltd. In order to gain more time and knowledge, Khazanah has extended its offer period for Parkway to 26th July from 8th July.

According to a report by the Malaysian Reserve, Khazanah is seeking loans from five banks, which would enable the sovereign fund to increase its offer for Parkway. Khazanah has told Australia & New Zealand Banking Group Ltd, CIMB Group Holdings Bhd, DBS Group Holdings Ltd, Oversea-Chinese Banking Corp and United Overseas Bank Ltd that it may need to borrow at least one billion Singapore dollars (S$), the report said. Citing a person close to the developments, the newspaper said Khazanah will increase a planned sale of Islamic bonds to S$1 billion from S$500 million, in case it decides to offer more for the Parkway stake.

Last week, Fortis Healthcare, controlled by billionaire brothers Malvinder and Shivinder Singh, made a cash offer of S$3.8 per share to buy Parkway over Khazanah's S$3.78 per share offer.

On 27th May, Khazanah, which holds 23.8% stake in Parkway, made an open offer to increase its stake to 51.5% at S$3.78 per share. Fortis, on the other hand, holds 25.37% stake in Parkway, making it the largest stakeholder in the company. Fortis had bought stake in Parkway from US-based TPG Capital by paying S$959 million.

According to media reports, Khazanah is also waiting for Fortis to release offer documents to shareholders later this month before it takes a final judgement about its next move.

While Khazanah can make a partial offer to Parkway, the same is not true in case of Fortis. Under Singapore takeover laws, anyone who has bought shares in the past six months is forbidden from making a partial offer. This gives Khazanah an advantage over Fortis. While Khazanah can raise its price for partial offer, Fortis will have to make an offer for complete takeover, in case the bidding war breaks out.

This could potentially cost Fortis at least S$3.1 billion to buy out the remaining shareholders in Parkway. In other words, Fortis will have to shell out over S$4 billion, including the price it paid to TPG, for buying a company whose returns on shareholder's funds are just 7.7% for FY09. For 2009, Parkway's total revenues increased 7% to S$979.2 million compared with S$914.8 million a year ago. However, during the same period, its net profit increased 169% to S$124.9 million from S$43.4 million in the previous year due to better performance of its international operations. (See: http://www.moneylife.in/article/8/5766.html).

Last month, Morgan Stanley - the advisor to independent directors of Parkway Holdings - has said that Khazanah's offer price of S$3.78 is reasonable, but not compelling. This advice may compel Khazanah to sweeten its offer as well as put some pressure on Fortis as well.

In a circular sent out by Parkway's independent directors, Morgan Stanley said that five of Parkway's 17 directors are considered independent. Among the five, two plan to vote in favour of the bid and sell their shares, one does not plan to vote and will keep his stake, and two do not own shares in Parkway. Three other directors, Parkway's chief executive officer (CEO) Tan See Leng, former CEO Lim Cheok Peng and its vice-chairman Seow Yung Liang, will vote against Khazanah's offer and will not sell their shares, according to the circular.

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Daily Market View: It is still headed up

Resistance is at 17,900 but the market is bent on pushing higher

The market ended in the green for the second day in a row on strong global cues and on positive domestic economic news. The Sensex settled at 17,833, up 182 points (1%) and the Nifty closed at 5,352, up 55 points (1%). The indices started the day with a sharp rise, taking support from Asian markets. Trading was range-bound till mid-afternoon. The market regained its strength on the positive sentiment supported by upward revision in the gross domestic product (GDP) growth by the IMF.

Asian stocks were up for a second day on Friday, on positive US economic data. Key benchmark indices in Hong Kong, Indonesia, China, Taiwan, Singapore, Japan and South Korea were up by 0.5% to 2.3%.

Wall Street was up for the third straight day on Thursday on investors' optimism supported by the decline in jobless claims. Initial claims on State unemployment benefits dropped 21,000 to a seasonally-adjusted 454,000 in the week ended 3rd July, the lowest level since early May, the US Labor Department said. The Dow was up 120.7 points, (1.2%) at 10,139. The S&P 500 was up 9.9 points (0.9%) at 1,070.2. The Nasdaq was up 15.9 points (0.7%) at 2,175.4.

European Central Bank president Jean-Claude Trichet dismissed the idea that the cost-cutting measures taken by the governments in various euro nations would bring about recession.

The International Monetary Fund (IMF) on Thursday raised its world output forecast for 2010, citing solid growth in the first half, especially in Asia. It, however, expressed its concern over the downside risks flowing from Europe. The multilateral lender revised its 2010 world GDP forecast to 4.6%, up from a previous forecast in April of 4.2%. The 2011 GDP forecast was unchanged at 4.3%.

South Korea's central bank raised its key interest rate from a record low amid prospects for growth in the country's economy. The Bank of Korea announced that it had lifted the benchmark seven-day repurchase rate to 2.25% from 2% earlier.

Back home, the IMF raised India's growth forecast for 2010 to 9.5%, stating that favourable financing conditions and robust corporate profits will accelerate economic expansion. The IMF expects India's economy to grow at 8.5% in 2011.

India said that it will be committed to the Doha round of global trade talks and does not believe that bilateral and regional trade deals will affect the multilateral process. Trade minister Anand Sharma opined that an acceptable global trade agenda was the need of the hour for economic recovery.

Foreign institutional investors were net buyers in the equities segment, purchasing stocks worth Rs957 crore on Thursday. Domestic institutional investors were net sellers of shares worth Rs270 crore.

McNally Bharat Engineering Company (down 1.2%) has received orders for supply of a pre-treatment plant package for NTPC's Vindhyachal Super Thermal Power Project, Stage IV (2X500MW) for a total value of Rs33.77 crore. The scheduled time for completion is 24 months.

Pratibha Industries (down 0.6%) has secured an annuity project from the National Highways Authority of India (NHAI). Total annuities receivable from NHAI is Rs336.70 crore. The project, a joint venture with Abhyudaya Housing and Construction, involves two-laning with paved shoulders of the Bhopal-Sanchi section of NH-86. The construction period is two years and the payments shall be through semi-annual annuities of Rs12.95 crore for 13 years.

Titagarh Wagons (up 3%) said that The Commercial Court, Paris, has declared the company as winner of a bid for acquisition as a going concern, of the assets and business of a rolling stock manufacturing unit situated in France.

Shree Renuka Sugars (up 3.1%) has completed the acquisition of controlling stake of 50.34% in Equipav SA Acucar e Alcool, a Brazilian sugar and ethanol production company. Following this, Equipav has become a subsidiary of the Indian sugar major. The principal secured lenders have approved an acceptable debt-restructuring package to be stretched over 10 years.

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China voices concern over India 'blacklisting' telecom firms

China has taken a serious note of the issue and stated that it would negotiate with the Indian side after making the facts clear

Voicing its concern over reports that its telecom companies have been blacklisted by India, China today asked New Delhi to treat its firms fairly and called for an open and transparent system for them to operate in, reports PTI.

"We have noticed the list and are making an investigation. We hope India will provide a fair, open and transparent investment environment for Chinese companies," Chinese minister of commerce Chen Deming said today.

He was referring to reports that appeared in a section of the Indian media, which stated that some Chinese companies were being blacklisted by the Indian government.

The list includes 25 Chinese vendors, including Huawei and ZTE, official news agency Xinhua reported.

"We will investigate through normal channels between the two governments, and communicate and negotiate with the Indian side after making the facts clear," Mr Chen said.

Apparently referring to talks on the issue between National Security Advisor (NSA) Shivshankar Menon and Chinese leaders, Mr Chen said Indian authorities had given the assurance that their new security regulations would be fair and transparent, and not discriminatory to Chinese companies.

"We will wait and see," he said.

The Chinese minister also stated that China would strengthen communications with India to effect a sound investment environment for companies from the two countries.

After the talks, Mr Menon had told the media on 6th July that India is in the process of finalising an "open and non-discriminatory system" to import telecom equipment and address the concerns of all sections of the sector.

The state-run Global Times had carried a report on the alleged blacklisting and criticised the move by terming it discriminatory.

"Although India has publicly assured that it is not banning Chinese telecom products, a recent Indian media report revealed that its government has a blacklist that actually bars 25 Chinese telecom manufacturers in the name of security precautions," the daily said in its editorial, adding that the matter was confirmed by the Chinese embassy in India on Wednesday.

"Telecom equipment produced by big Chinese companies such as Huawei and ZTE have been exported to many countries and regions in the world and worked perfectly well without complaints about security glitches. Then why these worries in India when it comes to Chinese products, while other foreign brands such as Nokia and Siemens were given the green light," it asked.

"This is not the first time the Indian government has raised its big stick against Chinese companies and products.

By adopting protectionist measures against Chinese batteries, clothing, toys, electronics, motorcycles and even cars, the Indian government has been raising barriers against high-tech equipment from China in recent years," the newspaper said.

"Chinese telecom operations in India hire 90% of their staffers locally. It was not only job opportunities they have provided, but also products priced lower than other foreign brands. Therefore, banning Chinese brands will not help either side," it added.

"Chinese people respect India as an admirable Asian neighbour and have never been suspicious of its ambitions or jealous of its advancement in certain areas, such as the IT industry. In contrast, India has not reciprocated with due respect or trust. Both countries should believe that Asia is big enough to withstand and benefit from the rise of two powers," it said.

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COMMENTS

TP Viswanathan

6 years ago


The business of blacklisting Chinese products should now pass on to the consumer. One cannot expect anything spectacular from the bureaucracy and politicians. If citizens are not sensitive to the alarming market manipulation by China, India will very soon face the same fate as US, severely affecting its economy and export.

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