Bangkok Dusit Medical Services Plc (BDMS) has launched a voluntary tender offer for all shares of Bumrungrad Hospital Plc (BH) at 125 baht each, with the price not exceeding 20% of the offering price.
BH acknowledged the tender offer but asked all shareholders to closely monitor the situation and consider official announcements from BH and BDMS with regard to the transaction.
BH said it would act in accordance with relevant laws and regulations, eventually appointing an independent financial adviser to give an opinion on the tender offer, then inform shareholders through appropriate channels.
Linda Lisahapanya, managing director of BH, said the company was surprised because the two hospital groups have in the past operated separately without any collaborations or synergy.
BH and BDMS compete in the same segment and are market leaders, particularly for medical tourism and private tertiary healthcare catering to middle-class and high-end customers.
"BH believes it is in the best interests of consumers to preserve healthy competition in private tertiary healthcare, and we will cooperate with the Office of Trade Competition Commission (OTCC) to understand their view on competition policy with respect to the takeover bid."
On Wednesday, BDMS announced in a letter to the Stock Exchange of Thailand (SET) that it would make a conditional voluntary tender offer for 546.33 million ordinary shares and 1.21 million preference shares of BH, representing 75% of the total at a price of 125 baht per share.
In addition, BDMS intends to make a tender offer for all convertible debentures, owned by Bangkok Bank which can be converted into 137.36 million ordinary shares of BH.
The total value of the takeover would be 85.61 billion baht, but it could rise to 102.74 billion baht, a sum not exceeding 20% of the offering price.
BDMS holds 182.5 million ordinary shares of BH, representing 24.99% of total issued shares.
Narumol Noi-am, acting president of BDMS, said the group will hold its annual general meeting of shareholders on April 10 to consider and approve the tender offer.
"The objective is to be in line with BDMS policy," she said, "focusing on investment in the healthcare business in Thailand, having a competitive advantage in providing healthcare services at the globally accepted standard, and competitive pricing in comparison with the quality of the services, helping to attract clients worldwide.
"BH's business demonstrates strong growth and has the ability to generate favourable long-term returns, as it is a reputable hospital treating highly complex diseases, staffed with experienced medical personnel, and is well known among both Thais and foreigners."
Funds will come from BDMS's working capital and loans secured from financial institutions. BDMS said it has no intention to de-list BH or change its management policy.
BDMS reported revenue in the first nine months of 2019 of 70.8 billion baht and a net profit of 13.2 billion baht.
BH's revenue in the first nine months last year stood at 13.9 billion baht, with a net profit of 2.86 billion baht.
BDMS has 7,732 beds in total, while BH has 580 beds.
Tycoon Prasert Prasarttong-Osoth is the biggest shareholder of BDMS, with a 16.66% stake.
According to Yuanta Securities Thailand, BDMS will become a monopoly hospital business in Thailand with the largest market share if the deal goes through.
"This deal will cause BDMS to seek to complete all transactions such as loans from banks and increase the company's registered capital," Yuanta said. "BDMS plans to add two hospitals this year, totalling 50 locations."
The securities firm said BDMS will not set aside a huge budget for large projects in the future.
Santichai Santawanpas, the OTCC commissioner, said officials are monitoring the process.
"We need to see if the proposed tender offer succeeds," he said. "If a merger results in a market monopoly or creates market dominance, this requires prior approval from the office."
Violation of the Trade Competition Act would incur a penalty of 0.5% of the transaction value of the purchase.
Somsak Kiatchailak, secretary-general of the OTCC, said the case may require a thorough vetting of the country's hospital market.
The law already outlines a general framework for merger requirements, whereby prior approval from the OTCC is required if a merger results in a market monopoly or creates market dominance (with market share in the previous year of over 50% and at least 1 billion baht in turnover; or the top three business operators, in any goods or services, with a combined market share in the previous year of over 75% and at least 1 billion baht in turnover).
Any merger that causes a significant reduction in market competition must be reported to the OTCC within seven days of the date of the merger.
BDMS shares closed yesterday on the SET at 23.20 baht, up 1.30 baht, in trade worth 1.61 billion baht. BH shares closed at 130 baht, up 18 baht, in trade worth 1.36 billion baht.