Lippo makes cash offer to raise stake in Healthway Medical

A Healthway Medical Corporation (HMC) outlet in Shanghai. Lippo is moving swiftly to fortify its stake after HMC entered into a convertible notes deal with a new investor - Cayman-based Gateway Fund I - last month that could give Gateway significant
A Healthway Medical Corporation (HMC) outlet in Shanghai. Lippo is moving swiftly to fortify its stake after HMC entered into a convertible notes deal with a new investor - Cayman-based Gateway Fund I - last month that could give Gateway significant control over how HMC is managed.PHOTO: HEALTHWAY MEDICAL CORPORATION

Move comes amid tussle for control of private clinic operator

The fight for control over one of Singapore's largest private clinic operators has just heated up.

Hong Kong-listed Lippo and Lippo China Resources, controlled by Indonesia's Riady family, yesterday launched a cash offer of 4.2 cents a share to raise their stake in Healthway Medical Corporation (HMC).

The offer comes shortly after Lippo first showed its hand at the end of last December, when it scooped up a 6.05 per cent stake in HMC.

Lippo's offer vehicle, Gentle Care, said in an offer announcement to the Singapore Exchange yesterday that it intends to keep HMC listed, and is making the offer to raise its shareholding.

"The offeror believes that it can provide the company with a stronger shareholder base to support the company's future business growth plans," said Gentle Care.

"Lippo and Lippo China Resources see the business potential in the healthcare industry in Singapore, and would therefore like to establish their presence in this field."

A BETTER OPTION

We think Lippo's offer undervalues the company, but is definitely superior to the convertible bond deal which HMC is pushing to shareholders.

MR HAVARD CHI, portfolio manager of Quarz Capital Management, which has a stake in HMC.

It added that HMC, as a well-established private healthcare provider in Singapore, matches Lippo's strategy to acquire "quality healthcare management capability".

Lippo is moving swiftly to fortify its stake after HMC entered into a convertible notes deal with a new investor - Cayman-based Gateway Fund I - last month that could give Gateway significant control over how HMC is managed.

HMC intends to raise $70 million from Gateway by issuing convertible bonds that can be swapped for up to 90.17 per cent of HMC's existing share capital, or 47.4 per cent of its enlarged share capital.

The notes will give Gateway the right to nominate two non-executive directors to the HMC board and pick out a chief financial officer.

HMC would need Gateway's consent before entering into "any material transactions, undertakings or corporate actions", including the appointment or removal of its chief executive officer.

HMC shareholders have not yet voted to approve the size of the notes conversions, but Lippo's cash offer will extend to any new shares issued in relation to the proposed convertible notes issue.

Gentle Care said in the offer statement: "The terms of the convertible notes appear onerous, may be detrimental and (may) not be in the best interest of the company in the light of other possible financing alternatives."

Lippo's offer is subject to it having received, by the close of the offer, valid acceptances for the group to control more than 50 per cent of the voting rights in HMC.

As of last Thursday, Lippo-linked entities had a 13.29 per cent stake in HMC.

At 4.2 cents a share, Lippo's offer represents a premium of 13.8 per cent, 19.7 per cent, 19.3 per cent and 22.1 per cent over the volume-weighted average price per share for the one-month, three-month, six-month and 12-month periods immediately prior to the offer announcement.

HMC shares rose 0.1 cent, or 2.5 per cent, to close at 4.1 cents yesterday before the offer announcement was made.

Mr Havard Chi, portfolio manager of Quarz Capital Management, which has a stake in HMC, said: "We think Lippo's offer undervalues the company, but is definitely superior to the convertible bond deal which HMC is pushing to shareholders.

"All shareholders have to take action to prevent a convertible deal like this, which we think destroys the company's value."

Last month, OUE, which is also controlled by the Riady family, picked up a 12.5 per cent stake in International Healthway Corporation, which was spun out of HMC.

A version of this article appeared in the print edition of The Straits Times on February 08, 2017, with the headline 'Lippo makes cash offer to raise stake in Healthway Medical'. Print Edition | Subscribe