PRESENT POINT POWER

Prime Minister Datuk Seri Abdulah Ahmad Badawi is in a dilemma over Singapore's Parkway Holdings Ltd 30 per cent stake in Pantai Holdings Bhd. which owns two government concession companies that come with shareholding restrictions.and both concessions are believed to be in breach of the requirement to have 51 per cent Malaysian and 30 per cent bumiputra shareholding at all times.

What message will PM Abdullah sent to foreign investors? Despite the difficulties, the deal to remain?

Read on…from
http://business-times.asiaone.com/

It's best to leave the Parkway-Pantai deal alone
There's merit in the old Arab saying: the dogs may bark but the caravan
moves on; By S JAYASANKARAN KL CORRESPONDENT;Published August 21, 2006

THE Parkway Group's purchase of a controlling 30 per cent interest in Malaysian healthcare provider Pantai Holdings is in danger of being scuttled by politics.

In November last year, Parkway, a Singapore-listed but American-owned healthcare firm, bought into Pantai in a purchase that was immediately flagged by financial analysts as potentially sticky. Reason: Pantai owns two government concession companies that come with shareholding restrictions.

The two are Fomema and Pantai Medivest. The former has a 15-year concession to manage and supervise compulsory medical check-up's for foreign workers while Medivest has a concession to provide support health services for all hospitals in the southern region of Peninsular Malaysia.

More to the point, Fomema's charter stipulates that it has to have 51 per cent Malaysian and 30 per cent bumiputra shareholding at all times. Medivest does not have such an explicit requirement but most analysts believe it is deemed to have it in any case.

Which raises a problem: with Parkway's takeover, both concessions are believed to be in breach. And unless it is rectified, it can constitute grounds for government termination of the concession agreement.

Unfortunately, this is hardly the right kind of signal to transmit for a country wanting to woo foreign portfolio investment. Malaysia has investment guarantee agreements with many countries including Singapore which basically reassures investors that they will not lose out if things are changed mid-stream.

One can hardly blame Parkway in this matter. Pantai is a listed company in a non-regulated sector which is why the deal went through on a willing-buyer-willing-seller basis without opposition or caveat from any government agency. So, the deal had nothing to do with government incompetence, omission or favouritism.

At the heart of the matter is the political spat between Prime Minister bdullah Ahmad Badawi and former premier Mahathir Mohamad. Parkway is caught n a political crossfire between the two camps with one accusing the premier of being soft on certain countries, of selling the family silver to foreigners.

Now the opposition Islamic Party of Malaysia has jumped on the bandwagon and the spreading resonance seems to have spooked the premier who said last week that there was 'a problem' with the deal. Mr Abdullah said that the treasury was looking into the deal to see how it can be resolved.

Mr Abdullah is in an unenviable position because he's damned if he does and damned if he doesn't. If the contracts are simply cancelled, Malaysia gets a black eye in foreign investment circles.

If he instructs the concessions to be bought over by, say, Khazanah – which is probably the only party that can afford to buy it at a fair price – his critics will scream 'bailout'. Perhaps the best thing for the premier to do is to ignore it along the lines of an old Arab saying: the dogs may bark but the caravan moves on. And the premier can take a leaf out of Dr Mahathir's own book in this regard.

In 2001, Mokhzani Mahathir, his son who owned Pantai previously, sold the company to Chinese businessman Lim Tong Yong amid loud questions from the Opposition. The caravan moved on.

http://www.zoomfinance.com/

MALAYSIA'S PANTAI HOLDINGS SEES TWO OFF-MARKET BLOCK DEALS
- DEALERS 21-Aug-2006 14:57:00

KUALA LUMPUR (XFN-ASIA) - Pantai Holdings Bhd saw two blocks of shares, representing 2.53 pct and 1.76 pct of its share capital, changing hands in off-market deals, dealers said.

The 2.53 pct block, comprising 12.91 mln shares, changed hands for 29.71 mln rgt or 2.30 rgt a share, they said.

Another 9 mln shares, representing the 1.76 pct stake, changed hands for 21.06 mln rgt or 2.34 rgt per share.

The identities of the parties involved were not immediately known.

At 2.37 pm, Pantai was up 0.06 rgt or 2.61 pct at 2.36 on volume of 957, 500 shares.

Background -Events in 2005

On September 14 2005, Singapore's Parkway Holdings Ltd has acquired a 31 per cent stake in Pantai Holdings Bhd for RM312 million (US$82.8 million) to emerge as the largest shareholder of the leading private healthcare service provider in Malaysia. Analysts said the move by Parkway, South-east Asia's largest healthcare provider, may spark consolidation in private hospitals in Malaysia.

On Tuesday, Parkway purchased 89.7 million shares, for a 22.5 per cent stake, from Pantai's chief executive officer Datuk Lim Tong Yong for RM2.45 each at a 50 per cent premium to Pantai's closing price of RM1.63 on Monday, it said in a statement on Tuesday. Parkway bought an additional 35 million shares, or an 8.8 per cent stake, in the open market for RM1.70 each. The company also purchased 24.3 million warrants from Datuk Lim for RM1.33 apiece, bringing the total to RM311.6 million. Parkway, which is 26 per cent owned by US private equity fund Newbridge Capital, said there will be potential operational synergies with its existing two Malaysian hospitals and other hospitals in the region.

With the deal, Parkway would control Pantai's seven hospitals and about 1,000 beds. An analyst from Nomura Advisory Services told the Business Times that the entry of Parkway, an established healthcare provider with a proven track record, would substantially boost Pantai's performance. "There are not many players within Malaysia. Given Parkways entry, it should facilitate those who want to sell," the analyst said. JP Morgan's research head Melvyn Boey told the paper: "Most important (about the purchase) is that Parkway is very experienced in the healthcare industry and the whole consolidation exercise will help the industry." The entry of Parkway, the owner of the Gleneagles group of hospitals, could alert other private hospitals that there is a ready buyer in town.

And from Spore ST; Monday, August 14, 2006

S'pore investments become KL political fodder

Mahathir-Abdullah spat drags in issue of Singapore companies taking stakes in Malaysian firms

By Reme Ahmad; The Straits Times

THE purchase of any strategic Malaysian firm by Singaporean companies is a sensitive matter at the best of times for bilateral ties.

Now with the spat between former prime minister Mahathir Mohamad and his successor showing no signs of easing, past acquisitions from Singapore or rumours of new ones are bound to draw more fire.

The acquisitions by Singapore companies of stakes in national telecommunications firm Telekom Malaysia and carmaker Proton in recent years have not been forgotten.

But investments from Singapore have been thrown into the spotlight after Prime Minister Abdullah Badawi, in a widely viewed television interview rebutting Tun Dr Mahathir's attacks, last week was asked why Singapore firms often get negative reactions over deals.

'What is wrong with foreign companies buying shares in our companies? This should be seen in a positive way as it shows that they have confidence in our companies,' said Datuk Seri Abdullah.

'We allow foreign companies, be they from the United States, Korea or Japan, to buy the shares in Malaysian companies.

'But the case now is that when someone mentions Singapore, there are many who get angry. I do not know why, but we have to ask them,' he said.

Datuk Seri Abdullah's son-in-law, Mr Khairy Jamaluddin, alleged to be involved in deals linked to Singapore investors, also raised the issue in a speech at an Umno Youth meeting two weeks ago.

Mr Khairy, an investment banker and Umno Youth's deputy chief, urged people to find out more about the sale of health-care giant Pantai Holdings to Singapore companies before making any allegations.

While asset acquisitions by Singapore-based or Singapore government-linked companies are quite common here, political hackles are often raised when they involve what are deemed as strategic assets.

The sensitive assets include buying chunks in banks, hospital groups or telecommunications companies.

Politicians often point to the move by former prime minister Mahathir who turned down a SingTel plan to buy a stake in telecommunications group Time Engineering.

Last year's takeover of Pantai has raised a lot of negative reaction because it holds two lucrative Malaysian government concessions.

Additionally, its Singapore-based acquirer, Parkway Holdings, is controlled by American shareholders.

Last week, the Government of Singapore Investment Corp emerged as a substantial shareholder with a 5.01 per cent stake in Pantai.

The main Pantai concession is held by its subsidiary, Fomema, which has a monopoly on mandatory health checks on all foreign workers, which currently totals more than 700,000 people.

The other is subsidiary Pantai Medivest, which holds the concession to provide support services to all government hospitals and cli- nics in Negeri Sembilan, Malacca and Johor.

If nothing else, an issue Singapore companies must watch out for is how the Republic is often used as the bogeyman by both Umno and the opposition.

'Singapore is often used as a punching bag. Sometimes, it is used to divert attention from the real problems simply because no one loses any points when they attack Singapore,' said Mr Syed Azman Syed Nawawi, a central committee member of opposition Parti Islam SeMalaysia.

This sentiment is being played up in the ongoing Mahathir-Abdullah spat. The Republic was involved in a key contentious issue - the building of the Johor bridge to replace the Causeway.

Malaysia partly blamed the scrapping of the project on Singapore's failure to agree to build a full bridge if it did not get to buy Malaysian sand in return.

This was further fired up by Tun Dr Mahathir, who claimed it was the Abdullah administration which offered to sell sand to Singapore.