Brokerages tell HMI investors to take cash option for clean exit

Singapore

BROKERAGES are recommending that investors of Health Management International (HMI) take the cash offer by management and private equity firm EQT to take HMI private, calling the deal "fair" and a clean exit amid low trading liquidity.

Maybank Kim Eng on Monday downgraded its rating for HMI from "buy" to "hold", believing HMI's share price of S$0.66 prior to the deal fully reflects its fundamental value.

CGS-CIMB called the cash option "fair but not compelling", on a par with current valuations of Asean hospital operators. It did not change its "add" call and target price of S$0.68.

Meanwhile, UOB Kay Hian said PanAsia Health's offer is a healthy one to accept, while viewing the alternative of holding private shares with the uncertainty of future re-listing to be "undesirable".

HMI shares jumped as high as 9.1 per cent on Monday morning, just over an hour after the market opened, on news of an offer by its management and private equity firm EQT to take the company private.

As at 10.12 am, HMI shares were trading six Singapore cents higher at S$0.72. The counter last closed on July 4 at S$0.66, up 0.5 Singapore cent or 0.76 per cent. It called for a trading halt on July 5 before the market opened.

It has since closed at S$0.72 in Monday's trading session, up six Singapore cents or 9.09 per cent.

HMI had announced on Friday a joint bid with PanAsia Health Limited to privatise by way of a scheme of arrangement that values HMI at approximately S$611 million. PanAsia Health Limited is a special-purpose vehicle incorporated in the Cayman Islands and indirectly controlled by EQT Mid Market Asia III GP BV.

If successful, HMI will become a wholly owned subsidiary of PanAsia Health and will be delisted from the Singapore Exchange.

Under the scheme, each HMI shareholder will be entitled to receive for each HMI share either S$0.73 in cash, or one new ordinary share at the same price in PanAsia Health.

The offer price represents significant premiums to the volume-weighted average price (VWAP) over the past few months. It is a premium of 29.7 per cent over the six-month VWAP, 27.4 per cent over the three-month VWAP and 24.8 per cent over the one-month VWAP.

HMI added that its closing share price has only exceeded the consideration offered by the scheme on one trading day since the company's listing in 1999.