Parkway Holdings, the target of a $1.18 billion bid for control by Khazanah Nasional Bhd., fell the most in two weeks in Singapore trading after Morgan Stanley said the offer wasn’t compelling.

 

Parkway, Asia’s biggest hospital operator, lost 1.9% to $3.68, the lowest close since June 7. The price is less than the $3.78 a share Khazanah offered on May 27 to more than double its stake to 51.5% and overtake Fortis Healthcare as Singapore-based Parkway’s largest stakeholder.

 

Morgan Stanley made the comments as adviser to independent directors of Parkway in a circular distributed by the hospital operator today. Fortis, which owns 25.4% of Parkway, said June 15 it is “keeping its options open” after Kuala Lumpur- based Khazanah made the offer.

 

“Although the value implied by the offer price is reasonable, the offer price is not compelling in the context of a partial offer involving a change of control,” Morgan Stanley said in the circular. Parkway’s independent directors concur with the advice, according to the circular.

 

Fortis said on June 9 it plans to raise 27.5 billion rupees ($824.7 million) and its board approved doubling its borrowing limit to 60 billion rupees. The New Delhi-based hospital operator’s capital-raising and increased borrowing limits indicate preparation for countering Khazanah’s bid, Batlivala & Karani Securities India Pvt. said in a June 16 report.

 

The offer from Khazanah, a Malaysian state investment company, closes July 8. Fortis must announce by July 30 whether it plans to make a general offer for Parkway, Singapore’s Securities Industry Council, or SIC, said June 16.

Five of Parkway’s 17 directors are considered independent for the purposes of the Khazanah bid, according to the circular. Among the five, two plan to vote in favor of the bid and sell their shares, one doesn’t plan to vote and will keep his stake, and two don’t own shares in Parkway.

 

Three other directors, Chief Executive Officer Tan See Leng, former CEO Lim Cheok Peng and Vice Chairman Seow Yung Liang, will vote against Khazanah’s offer and won’t sell their shares, according to the circular.

 

Tan, Lim and Seow entered into an agreement with Fortis in March allowing the Indian company to tell them how to vote at shareholder and director meetings, according to the circular. Fortis also gave the three men a right to participate in “certain economic benefits,” the circular said.

 

Singapore’s SIC, which regulates takeovers, doesn’t consider the three directors independent for the purpose of Khazanah’s offer and they are exempted from making a recommendation to shareholders, according to the document.