Lippo makes S$103m takeover offer for Healthway Medical

Singapore

TWO weeks after buying into troubled healthcare group International Healthway Corp (IHC) through OUE, the Riadys have jumped ahead to seek control of IHC's former parent Healthway Medical Corporation through an estimated S$103 million takeover offer for Singapore's largest clinic chain. The offer could mean an exit for Healthway shareholders ahead of a potential convertible notes issue that is likely to be highly dilutive for them.

Substantial shareholder Gentle Care has made a voluntary conditional cash offer for all the shares of Healthway at S$0.042 in cash apiece.

Gentle Care is a wholly owned subsidiary of Valiant Leader and an indirect unit of entities including Hong Kong-listed Lippo China Resources (LCR), and Lippo Capital. Gentle Care controls about 13.3 per cent of the total number of issued shares.

The S$0.042 offer price represents a premium of 5 per cent over the last transacted price of Healthway on the last trading day prior to the announcement. Healthway closed at S$0.041 on Tuesday, up 0.1 Singapore cent. The stock was actively traded, with 162 million shares changing hands.

The takeover offer of S$103 million is calculated based on the existing share base, which may change if the proposed conversion notes are approved, and noteholders subsequently swap the bonds for equity.

"Lippo and LCR see the business potentials in the healthcare industry in Singapore, and would therefore like to establish their presence in this field," the offer document said. "The company, as a well-established private healthcare provider in Singapore, matches Lippo's and LCR's strategy to establish their presence in the healthcare industry in Singapore and to acquire quality healthcare management capability." The Riadys are behind Singapore-listed First Reit, a healthcare real estate investment trust that holds several hospitals in Indonesia, three nursing homes in Singapore, and one rehabilitation centre in South Korea.

Gentle Care also referred to a proposed S$70 million convertible notes issue, under which the bonds sold to investor GW Active can be swapped for up to 90.17 per cent of Healthway Medical's existing share capital, or 47.4 per cent of its enlarged share capital.

The takeover offer includes a pledge to acquire those convertible notes if the offer turns unconditional. At that point, Gentle Care would have to control more than 50 per cent of the voting rights based on the total number of shares that would be in issue if all the outstanding convertible notes prior to the close of the offer had been rightly converted.

"Lippo and LCR are of the view that the terms of the convertible notes appear onerous, may be detrimental and not be in the best interest of the company in light of other possible financing alternatives. The offer will give shareholders who concur with the views of the offeror an opportunity to exit on attractive terms."

The directors of Healthway had said the convertible notes were needed to address short-term liquidity needs and meet its working capital requirements. While Healthway runs the largest network of medical centres and clinics in Singapore, IHC owns medical facilities overseas.

OUE emerged as a substantial shareholder of IHC this year, a Jan 23 regulatory filing showed. That same day, IHC's entire board was voted out by shareholders. The new IHC directors have also lodged a police report against ousted executive director Angeleca Lim. Any OUE move on IHC has been put on hold as shares of IHC have been suspended since Jan 27, with the new IHC board - led by Oxley Holdings' Ching Chiat Kwong and Eric Low See Ching - saying it needed time to "determine the current state of affairs of the company".

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