Parkway’s chief executive officer, executive vice-chairman and vice-chairman today disclosed they had entered into a co-investment agreement with Fortis in March to secure the retention of their respective roles in Asia’s largest healthcare chain.
Among other things, the arrangement provides that Fortis will engage in a discussion with the three executives in relation to voting of their shares in the company.
Following their arrangement becoming public, the three directors on the board of Parkway told the Singapore Stock Exchange today that the agreement did not prevent them from taking independent decisions in the interest of the company. The communiqué was signed jointly by Richard Seow, Parkway vice-chairman, the company’s executive vice-chairman Lim Cheok Peng and CEO Tan See Leng.
However, they added: "In general, we have agreed to vote with Fortis as shareholders of the company." This disclosure has come as a surprise at a time when both Khazanah and Fortis are engaged in a bidding war for control of Parkway, with analysts and other observers pointing out that this violates corporate governance rules in Singapore. Morgan Stanley, in their recent circular, also noted that due to the arrangement that the three senior executives have with Fortis, they should not be considered independent directors. The stock market regulator in Singapore has also taken note of this and exempted these three directors from advising other Parkway shareholders on Khazanah's offer.
The three directors said when the Singh family-promoted company acquired 24 per cent stake in Parkway, it wanted the senior management to continue to ensure that the strategies would continue. As a result, it offered Seow, who was then the chairman, the position of vice-chairman, while the other two executives continued in their existing roles.
“In addition, so as to ensure alignment with the interests of the shareholders, with the objecting of achieving significant total shareholder returns, Fortis invited the three of us to enter into a co-investment arrangement with a financial arrangement structured to secure the retention of the three of us in our respective roles in the company,” the three directors said in the exchange filing.
Parkway, which runs Asia’s biggest private hospital chain, is in the midst of a takeover bid after the Malaysian government’s investment firm, Khazanah Nasional, Berhad announced a partial offer to acquire 51.5 per cent shares in Parkway for S$ 3.78 a share. India’s Fortis Healthcare is the largest share holder in Parkway, followed by Khazanah’s healthcare investment.
When contacted, a Fortis spokesperson refused to comment on the issue.
The clarification to SGX came after the Straits Times and Business Times, newspapers in Singapore, expressed concern over Parkway governance in the backdrop of the agreement the directors have with Fortis.
A report by Morgan Stanley, the independent advisor to Parkway’s directors, had informed that of the 17 directors of Parkway, 12, including the three who made their clarifications to SGX today, had not been considered independent directors due to their stated voting positions.
Morgan Stanley had also disclosed that the agreement Fortis has with the three directors include voting agreements and some economic benefits, if Fortis sells more than 10 per cent shares it holds in Parkway during the agreement period. The directors had agreed not to dispose of or transfer any part of their shareholding during the term of agreement.
Based on the disclosure, Singapore’s security watchdog, Securities Exchange Commission, had exempted these directors from making a recommendation on the partial stake purchase offer made by Khazanah.
Morgan Stanley had yesterday stated that Khazanah’s offer to buy 313 million shares of Parkway at S$3.78 a share was reasonable, but not “compelling”. It also said while Khazanah's offer price was much higher than Parkway's average share price in the 12 months preceding the offer, it was just 6.5 per cent above the average price target of S$3.55 set by stock market analysts who cover the company.
Morgan Stanley associates have purchased around 450,000 Parkway shares from the open market during the past few weeks.
Parkway shareholders have time till July 8 to accept Khazanah's partial offer, while the securities regulator has given time till July 30 for Fortis to declare its intentions for an alternative bid for Parkway.
Fortis became the largest shareholder in Parkway after it acquired 23.9 per cent stake in Parkway for S$959 million (around Rs 3,000 crore) in March.
