Parkway buys 31% stake in Pantai

SINGAPORE'S Parkway Holdings Ltd has bought a 31% and controlling stake in Pantai Holdings Bhd for RM312mil, which Pantai group chief executive Datuk Lim Tong Yong said would help improve its operations and prospects. 

“It is about entering into a bigger company in the healthcare business and growing regionally. This way we can learn and, in time, grow even bigger,'' he said in an interview yesterday. 

“Parkway can bring synergies from many aspects.'' 

Parkway announced yesterday that it paid RM59.5mil for a 8.8% stake, or 35 million shares, in Pantai in an off-market transaction at RM1.70 a share. It also entered into a sale and purchase agreement with Lim for a 22.5% stake, or 89.7 million shares, in Pantai for RM219.8mil or RM2.45 a share. Parkway further bought 24.3 million Pantai warrants from Lim for RM32.3mil or RM1.33 a warrant. 

Pantai shares, which will resume trading today, was last traded at RM1.63 on Monday, its highest since April 2002. 

Datuk Lim Tong Yong

Lim, a lecturer-turned-businessman and executive chairman of Paos Holdings Bhd, will still retain about 40 million shares, or about a 10% stake, in Pantai following the acquisition by Parkway. “I will still continue to be with Pantai,'' he said. 

Parkway is 26% owned by US private equity fund Newbridge Capital. 

In a statement yesterday, Parkway said the acquisition would make it the largest shareholder of a leading private healthcare service provider in Malaysia. 

“There will be potential operational synergies with Parkway's existing two Malaysian hospitals and other hospitals in the region,'' said the Singapore company. 

With the deal, Parkway would control Pantai's seven hospitals and about 1,000 beds. 

Apart from the two hospitals in Malaysia, Parkway owns three hospitals in Singapore and a cardiac centre in Brunei. It also jointly runs a hospital in India with Apollo Hospitals Enterprise Ltd. 

Parkway chairman Richard Seow said: “The acquisition announced will enable us to expand our base of business and to grow our presence in this very important market, from two hospitals to nine and ancillary facilities across the country. It is in line with our strategic direction of building on our strengths and growing in key regional markets.'' 

The company's managing director, Dr Lim Cheok Peng, said Parkway was pleased to have had the opportunity to buy the Pantai stake and, “with the enlarged platform, we expect to accrue synergies over time''. 

The deal also got the thumbs up from the broking community. 

“From Pantai's perspective, the deal is positive,'' said JP Morgan Malaysia head of research Melvin Boey. 

He said Pantai would gain help from an experienced hospital group with a track record and expertise. 

The deal would also see Lim make a healthy profit from the Pantai shares he bought from Datuk Mokhzani Mahathir in April 2001. Lim bought a 32.9% stake in Pantai from Mokhzani for RM59.6mil. 

Pantai's stock price has surged over the past few months after it became apparent that the company had turned around and was on the verge of better profitability. 

For the financial year ended June 30, 2005, Pantai recorded a net profit of RM43.6mil, a record. Analysts polled by Reuters Estimates have projected the company to earn RM64mil for its 2006 financial year. The bulk of Pantai’s income is derived from its two major concessions, FOMEMA Sdn Bhd and Pantai Medivest Sdn Bhd. 

Analysts feel that Parkway can help bring in health tourism dollars to Pantai and improve the bed utilisation rate. 

Further improvements can also be obtained from Pantai's pre-tax margin, which is slightly below 7% compared with Parkway's near 11% rate for its Malaysian hospitals. 

Lim feels Parkway's presence in Pantai would not jeopardise its concessions, considering the improvements Pantai has made in the operations of its major cash cow in recent times. 

“There is no change in the people who are running the concessions,'' he said, pointing to the better climate for cross-border deals. 

Lim said the present management at Pantai was doing well and that Parkway “would like to continue and use the strength of the local management”. 

“This will give our management the chance to go overseas and see how others are operating.” 

Lim said Parkway's entry would not exclude Pantai from future acquisitions internationally. 

In an announcement to Bursa Malaysia yesterday, Pantai announced that Newbridge Capital and Parkway director Ashish Jaiprakash Shastry, 30, and Parkway managing director Dr Lim, 59, were appointed directors of the company. 

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