Parkway deal a long-term boost, Fortis shares up on optimism

Who said shares fall when an acquisition is made by a company? Fortis Healthcare bucked the trend on Friday after its purchase of a significant minority stake in Singapore-based Parkway Holdings because of its perceived positive effect on the hospital chain company.

Who said shares fall when an acquisition is made by a company? Fortis Healthcare bucked the trend on Friday after its purchase of a significant minority stake in Singapore-based Parkway Holdings because of its perceived positive effect on the hospital chain company.

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A day after Fortis Healthcare acquired 23.9 per cent in Parkway Holdings of Singapore, its shares rose by over 5 per cent before ending the day 1.7 per cent up at Rs 181.

“We were already bullish on the stock after it acquired Wockhardt, but this deal makes this stock more attractive for the long term as it will boost Fortis’ growth,” said Alex Mathews, head of research, Geojit BNP Paribas Financial Services.

Fortis announced the $685 million (Rs 3,200 crore) deal that linked it to Parkway that runs 16 hospitals across six countries. The deal takes the Fortis network to 62 hospitals with more than 10,000 between them.

“It looks a little expensive in the short term but it is good for the long term growth. In the next year itself, Parkway’s profitability will get added to Fortis bottom line and that will lead to a rise in the earnings per share of the company,” said Mayank Shah, CEO, Anagram Securities.

As of now Parkway has a revenue of Rs 3,200 crore and a profits of Rs 400 crore. Based on that, Fortis should add close to Rs 100 crore to its profit next year.

While Fortis has entered into an agreement with leading private equity firm TPG Capital for its Parkway stake, it will also seek four seats on the board of directors, while Malvinder Mohan Singh joining the Parkway board as chairman.