Khazanah stands to make a pile from IHH stake sale

Healthcare provider: IHH operates 49 hospitals across nine countries. The group’s portfolio comprises premium-brand healthcare assets including Pantai Hospital.

CONTRARY to claims made by former Prime Minister Datuk Seri Najib Tun Razak, IHH Healthcare Bhd will remain very much a Malaysian entity after Khazanah Nasional Bhd’s partial divestment of its stake in the healthcare services provider.

No doubt, Khazanah’s sale of a 16% stake in IHH to Mitsui & Co Ltd will result in the Japanese group becoming the largest shareholder in the company.

But collectively, Khazanah, together with other Malaysian funds such as the Employees Provident Fund (EPF), Kumpulan Wang Persaraan (diperbadankan) and Permodalan Nasional Bhd, will continue to own a bigger stake in IHH than Mitsui.

Over the week, Khazanah announced that it would be selling a 16% stake, or 1.4 billion shares, in IHH to Mitsui at RM6 per share.

The RM8.42bil divestment deal will effectively reduce Khazanah’s shareholding in IHH to 26.05%, and increase Mitsui’s stake to about 33%.

Najib on Thursday questioned the deal, saying “the world’s second-largest hospital can no longer be known as a Malaysian-owned group nor can it be a national pride as it is owned by a Japanese group”.

In his Facebook posting, Najib wrote: “The country is losing an opportunity to build a global multinational company.”

However, based on Bursa Malaysia filings, it is estimated that about 40% of IHH shares will remain in the hands of Malaysian funds after the completion of the Khazanah-Mitsui deal.

While Khazanah may lose its chairmanship in IHH after the sale, the fund will still have a board representation by virtue of it being the second-largest shareholder in the company.

Overall, sources say, it is a good deal for Khazanah, as Mitsui is willing to pay a premium for the 16% stake in IHH in a weak market and due to the good working relationship with Khazanah.

The sovereign wealth fund is set to make a hefty gain of more than RM5bil from the deal.

Khazanah listed IHH at RM2.85 per share six years ago. At that time, it was reported that Khazanah’s cost of investment in IHH was about RM1.60 per share.

“So, Khazanah’s cost is between RM1.60 and RM2.85. Based on the share sale of RM6 per share, Khazanah stands to make a huge amount from the sale of the 16% stake,” says an analyst.

It is safe to note that Mitsui’s entry cost is also low.

The Japanese group came into IHH just before the latter’s listing at about RM2 per share. It acquired a 30% stake, forking out RM3.3bil in April 2011.

IHH operates 49 hospitals across nine countries, including Malaysia, Singapore, Turkey and India. The group’s portfolio comprises premium-brand healthcare assets such as Mount Elizabeth, Gleneagles, Pantai and Acibadem brands.

Khazanah’s venture into IHH started in 2005 with the acquisition of a 13.2% equity in Indian healthcare firm Apollo for RM165mil. Following that, the fund acquired a 100% stake in IMU Health and Pantai Holdings Bhd in 2007 and Parkway Holdings Ltd in 2008.

Before being taken private, Pantai Holdings and Parkway Holdings were listed in Malaysia and Singapore, respectively.

Khazanah took Pantai Holdings private in a RM1.25bil deal, or RM2.65 per share, in 2006. It subsequently took Parkway Holdings private in 2010 at a cost of about S$3.5bil (then about RM8bil) or S$3.95 per share.

After taking Parkway Holdings private, Mitsui came into the picture a year later.