Malaysian SWF IPO causing a commotion
By Paul Mackintosh - 15/06/12
Despite the sad news of the delay to the Formula 1 IPO, Singapore need not be too disappointed, as the SGX is still getting a cut of the second biggest IPO worldwide since Facebook: the US$2 billion+ flotation of Malaysian SWF Khazanah’s healthcare assets as Integrated Healthcare Holdings (IHH). Many will recall that a healthy chunk of those assets, the Parkway Holdings hospital group from Singapore, came out of private equity hands, when TPG Capital sold up its stake leading to a hotly contested takeover battle that eventually went to Khazanah. Other components include Turkey’s Acibadem AS, India's Apollo Hospitals and Malaysia-based Pantai Hospitals and International Medical University, all in well-liked high-growth markets.
The Hang Seng’s unwelcome precedent of cornerstone investors is being followed to prop up the float. According to Reuters, Blackrock, Capital Group and Och-Ziff Capital Management Group are being joined by the Government of Singapore Investment Corporation (GIC) – which ironically was at one time touted to intervene in the Parkway takeover tussle – Fullerton Fund Management, AIA Group and Hwang Investment Management, as well potentially as the Kuwait Investment Authority. Local institutional backers include the Employees Provident Fund, Permodalan Nasional Bhd and the Haj Pilgrims fund, according to the Wall Street Journal. So this flotation by one Malaysian SWF is to be picked up by another. The sentiment challenges that could force an F1 vehicle off the road are clearly not enough to stop a government-backed juggernaut.
Institutions are not the only beneficiaries. According to local press, pre-IPO tranches are already being offered to high-net-worth bumiputras, the ethnic Malay citizens guaranteed preferential rights by the dominant United Malays National Organisation. Remember the demonstrations and tear-gassing in Kuala Lumpur just a couple of months ago? Against the continuation of exactly this system? Then wonder about the timing of this listing, which seems calculated to get all major Malaysian institutions and many individuals behind it. And wonder what prospect there is for rational pricing in this kind of environment. The intersection of politics and finance in Asia has rarely been more transparently on display.
Headlines in the likes of the Financial Times are already forecasting the end of the cult of equities, as punch-drunk institutions abandon the bourses. The Facebook debacle has cast a pall over the whole IPO market in the West. Fortunately for hungry investment bankers, eager exchanges and interested governments in Asia appear ready to inflate the bubble for a little longer. Forget tapping the public markets to grow or price discovery to accurately gauge the value of an entity: we’re talking political capital. Speculation around the China Investment Corporation long centred on what its huge pool of assets could ultimately be used for. Khazanah suggests one answer.