Malaysian state investment fund Khazanah Nasional raised M$829 million ($201 million) from a secondary selldown of shares in IHH Healthcare on Tuesday as it continues to pare down its stake in the hospital operator, which listed four years ago.
The transaction marked the first attempt by Khazanah to sell IHH shares directly through a public equity deal. Yet, it should come as little surprise for investors familiar with IHH, since the state fund has been slowly trimming its shareholding in the secondary market.
Khazanah owned 62.1% of IHH prior to the hospital operator’s dual listing on the Bursa Malaysia and Singapore Exchange in 2012. Its shareholding was diluted to 45.3% post-listing, and was subsequently reduced to 42.8% before Tuesday’s sale.
After Tuesday’s 1.6% stake sale, Khazanah’s shareholding in IHH has declined to 41.2% although it remains the largest shareholder.
Japanese trading company Mitsui & Co is the second largest shareholder in IHH with a 20% stake, while Malaysia’s Employees Provident Fund is the third largest with 8.4%.
Khazanah's ownership could be further reduced in October this year when holders of its S$500 million Islamic bonds began exchanging them into IHH shares. The opportunity for an exchange is likely to be highly popular given that IHH shares have been trading way above the M$4.9023 strike price.
Tuesday’s deal covered 130.3 million IHH shares offered at an indicative price range of M$6.36 to M$6.46 per share. Khazanah sold IHH shares listed on Bursa Malaysia, which are more liquid compared to those listed in Singapore.
The Reg S/144A trade was nearly covered by a group of international and domestic investors at launch, so closing the deal did not prove difficult despite the fact it launched relatively late at around 6:30pm Kuala Lumpur time. Final pricing was settled at M$6.36, equating to a 1.5% discount on the M$6.46 Tuesday close.
One source familiar with the situation said allocation was top-heavy with the top six accounts getting close to 90% of the deal.
Khazanah will be happy with the sale, executed at a time when IHH shares are trading at near-record level. By selling shares at M$6.36, the fund has made a return of at least 220% over the course of four years compared with IHH’s M$2.8 IPO price.
It was also able to achieve a tight discount given that IHH shares are highly liquid, with nearly $11 million worth of trades per day. As such, the $201 million deal represents less than 20 days of volume and is relatively easy for the market to digest.
CIMB and Deutsche Bank were joint bookrunners on the transaction.
IHH has quickly become one of the most popular stocks for global healthcare specialist funds since listing in 2012. It is Asia’s largest hospital operator with 16 hospitals in Malaysia and Singapore, and also operates 17 hospitals through its 75%-owned Turkish subsidiary Acibadem Healthcare.
At $12.8 billion the firm is the fourth-largest listed company in Malaysia. It is also one of the 30 constituents of the Kuala Lumpur Composite Index.
