Apollo to manage Khazanah hospitals

 Source : F C:Sangeetha G. May 30 2010 , Chennai

Apollo Hospitals, in which the Malaysian sovereign fund, Khazanah Nasional, has a little over

12 per cent equity, is taking the association a level higher. It will now participate in the management of hospitals in which Khazanah has equity stakes.

This adds a new dimension to the battle of control over the Singapore-based Parkway.

Khazanah is trying to wrest control of Parkway from Fortis. To that end, it has made an open offer, at a 25 per cent premium over last Thursday’s market price, to take its shareholding above 50 per cent. Apollo tacitly supports the Khazanah campaign.

Suneeta Reddy, Apollo’s executive director of finance, told Financial Chronicle that the higher level of association with Khazanah would not involve any investment commitment from her company.

“But we will leverage synergies in the healthcare services and education ventures of Integrated Health Holding of Khazanah. We will share clinical best practices, participate in the management of hospitals and medical universities owned by them,” she said.

Khazanah has 60 per cent in the Panthai group, which runs nine hospitals in Malaysia. Besides, it owns 70 per cent in International Medical University in Malaysia and 26 per cent in Parkway.

Apollo is also directly associated with Parkway through a joint-venture partnership in Apollo Gleneagles Hospital in Kolkata. It is yet to be seen how Apollo reconciles with the fact that Fortis, which is in control of Parkway after having bought 23.9 per cent equity in the Singapore company for $685 million in March, now faces a challenge from Khazanah.

By virtue of that control, Fortis is in charge of Parkway’s hospital chain with presence in China, Malaysia, Brunei and Singapore. If Khazanah succeeds in wresting control with the help of $835 million offer, many of these hospitals will come under the management of Apollo.

Much depends, though, on how Fortis will handle the Khazanah open offer. It has three options: 1) cash out, 2) stay as a minority shareholder and accept Khazanah’s control of Parkway, and 3) stave off Khazanah by making a counter-offer. So far, it has not indicated which way it will go.

If Fortis opts to stay in Parkway as a minority stakeholder, Khazanah may divest it of its management functions and hand over the running of the hospitals to Apollo. Asked about this possibility, Reddy said it was “premature to comment”.

To a query by Financial Chronicle, a top Fortis official said: “I have no news to give you on Parkway. Wait for developments to unfold”.