India’s Fortis Healthcare and its founding family launched a bid valuing Singapore hospital operator Parkway Holdings (PARM.SI) at US$3.1 billion ($4.3 billion), topping a rival offer by Malaysian state fund Khazanah.

Fortis (FOHE.BO), which controls just over 25% of Parkway, had intended to build a controlling stake in the firm before Khazanah made a surprise US$835 million partial offer in May to lift its stake to 51.5%. 

 

“Fortis is just testing the water with this offer. Had it been serious it could have made an offer Khazanah wouldn’t have been able to match,” said Ranjit Kapadia, an analyst with Mumbai-based HDFC Securities. 

 

He expects Khazanah to match this offer. 

 

By pitching a higher offer, RHC Healthcare, 49% owned by Fortis and the remainder by the hospital chain’s controlling Singh brothers, Fortis aims to prevent Khazanah from taking over Asia’s biggest hospital group which runs 16 hospitals. 

 

Both Fortis and Khazanah want to use Parkway, which runs hospitals in Singapore, Malaysia, India and China, to spearhead their regional expansion in healthcare. 

 

RHC Healthcare and the Singh brothers are offering to buy shares they don’t already own in Parkway for $3.80 a share, or 2 cents more than the $3.78 offered by Khazanah. 

 

The offer price is at a slim premium to Parkway’s last traded price of $3.57. Parkway shares are suspended from trading. 

 

“It’s just the beginning of a bidding war,” said Ambareesh Baliga, an analyst with Mumbai-based brokerage Karvy Stock Broking. “A price of up to $4.2 would be fair for Parkway.” 

 

The offer is conditional on Fortis getting at least 50% of the Singapore firm. Fortis shares rose as much as 3% on Thursday morning after an initial drop, while Parkway shares were suspended. 

 

Fortis and billionaire Indian brothers Malvinder and Shivinder Singh have already secured funds for the acquisition, said Sachindra Nath, CEO of Religare, which is also controlled by the Singh brothers and is the strategic advisor to Fortis. 

 

Macquarie (MQG.AX) and Royal Bank of Scotland (RBS.L) are the financial advisors to the offer. 

 

Fortis will need to pay $3.21 billion for the shares in Parkway that it does not already own. 

 

Last week, Fortis said the Government of Singapore Investment Corp (GIC) had decided to defer a preferential investment but the sovereign wealth fund would evaluate participating in broader fund raising by Fortis. GIC holds Fortis convertible bonds. 

 

Fortis said RHC Healthcare hopes to maintain Parkway’s listing status on the Singapore exchange.