Will Prathap C Reddy family, promoters of Apollo Hospitals, gain the most from Malaysian sovereign fund Khazanah's counter bid for Singapore's Parkway Holdings? On paper, there isn't any obvious connection. Official talk suggested the sovereign fund was making an expensive offer only to further its healthcare interests in Asia. Interestingly, Khazanah's move comes just two months after it, as the largest shareholder in Parkway then, watched Fortis Healthcare snap up TPG Capital's 23.9% stake and management control.

Khazanah's surprise control bid on Thursday has the potential to oust Apollo's arch rival Fortis from Parkway, one of Asia's largest premium hospital networks. The two brothers at Religare Enterprises, Malvinder Singh and Shivinder Singh, have outsmarted the Reddys at Apollo in their audacious acquisition strategy to develop a hospital chain, which was intended to transform Fortis into a formidable healthcare service provider. 

Now, consider this: Khazanah has been an investor with over 13% stake in Apollo since 2005. Khazanah's ties with Apollo promoters go beyond that of mere financial investors and has been steady. It is believed that the daughters of Prathap Reddy facilitated the Khazanah investment to take out another long term investor TWL Holdings five years ago. The Reddys entered into two joint ventures with Parkway for hospitals in Kolkata and Hyderabad. The Apollo promoters also have other Malaysian connections, as they partner Maxis Communications in the latter's Indian telecom operations under Aircel.

So, can Reddy be the kingmaker, if not the king himself? Some analysts and bankers think Apollo could bounce back in a big way following Thursday's developments, and it is backed by strong logic. With only 34% stake in Apollo Hospitals, the Reddy family probably hopes to leverage on its cross border partners to battle the Fortis juggernaut. For Khazanah, the deepening of partnership with Apollo will help them crack one of the biggest emerging healthcare markets given the local partner's footprint in India. 

Sources said Khazanah and Apollo could strengthen their ties in the event of a successful control bid for Parkway. "There are several possibilities in the making," said a source who has dealt with Apollo in the past, and who did not wish to be named.

Meanwhile, Reuters quoted Khazanah official stating the sovereign fund would like to consolidate its shareholding its various Asian Hospitals like Parkway, Apollo, Pantai and IMU to emerge as a strong continental player in premium healthcare. Email queries to Apollo Hospitals Group spokesperson and Chairman Prathap Reddy's office remained unanswered at the time of posting this report.

After Khazanah's bid announcement, Apollo stock soared 8% to close at Rs 761.40, while Fortis climbed up 7.34% to touch Rs 149.85 on BSE. The movement in Fortis counter was mainly on hope of the company exiting Parkway with profit as the Singhs might sell-off to Khazanah.

Another source, talking on condition of anonymity, warned that it may be premature to write off Fortis in this battle. "The move by Fortis to allot shares to GIC, a sovereign fund of Singapore, could have been a strategic one. It could come to their help even though Malaysia and Singapore have improved their ties in recent times," he added.

Ranjit Kapadia, vice-president, institutional research, HDFC Securities, attribute the suddden increase to Khazanha's statement on consolidation. "The investors are keen on Apollo in anticipation of Khazanah's moves. Also, Khazanah's statement saying consolidation plans with Apollo made the stock attractive."

Earlier, on Thursday, Khazanah's offer to hike stake in Parkway came at S$3.78 per share. Khazanah will pay approximately S$1.18 billion (US$835 million) to hike its shareholding to 51.5% up from 24% currently. In March this year, Fortis Healthcare paid US$685 million to acquire TPG's 23.9% stake along with management duties of the hospital chain with presence in China, Malaysia, Brunei and Singapore. 

Reuters quoted Ang Kok Heng, Chief Investment Officer at Kuala Lumpur-based Philip Capital stating that "Khazanah has identified healthcare as one of the core areas that they want to go into. This offer shows that they're moving towards that same direction." In 2006, Khazanah bought into hospital operator Pantai Holdings, which has a network of nine hospitals throughout Malaysia.

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