So there we have it. The healthcare company that started as Gleneagles Hospital in Singapore in 1957 is now worth S$4.5 billion ($3.3 billion) and is about to sold off to Malaysia’s sovereign wealth fund.
Khazanah has offered S$3.5 billion for almost three-quarters of Asia’s largest hospital operator, topping a bid by Fortis Healthcare.
Buying Parkway would give Khazanah full ownership of 16 additional hospitals in eight Asian nations, adding to its stakes in India’s Apollo Hospitals Enterprise Ltd. and IMU Health Sdn Bhd. in Malaysia.
Simultaneously, it torpedoes Fortis Healthcare’s attempts to grab the Asian healthcare market.
Parkway has more than 3,400 hospital beds in China, India, Malaysia and Singapore, where it runs both Gleneagles and Mount Elizabeth. Trading in the shares has now been suspended.
Khazanah’s offer is a whopping 28 times estimated 2010 earnings, and while Parkway is growing strongly (especially in Singapore), whether or not the company ends up being worth the price depends on how the Chinese market develops. Parkway said in February that it is looking at acquisitions in China to help it grow.
However, as outlined here, there are plenty of reasons to think that Parkway’s model in China, which involves extremely high billings, may not be sustainable. Parkway and United Family operate a cosy duopoly in the Chinese private healthcare market, but can they continue to compete when Chinese hospitals are raising their game? I wish Khazanah plenty of luck.