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Singapore “Flyer” of the Week: Rowsley Limited

For the week, shares of Rowsley Limited (SGX: A50) “flew” 17.1% to S$0.13. In comparison, the Singapore market benchmark index, the Straits Times Index (SGX: ^STI), went in the opposite direction during the same period.

Rowsley Limited announced this week that it had inked a deal with billionaire Peter Lim to acquire 100% of Sasteria Pte Ltd, which owns Thomson Medical Pte Ltd and is the controlling shareholder of TMC Life Sciences Bhd (0101.KL) (TMCLS).

Thomson Medical is Singapore’s largest private provider of healthcare services for women and children while TMCLS is a multi-disciplinary healthcare company listed in Malaysia.

Under the agreement, Rowsley will acquire a full stake in Thomson Medical and a 70.36% stake in TMCLS for S$1.6 billion. It will issue 21.3 billion new shares at S$0.075 per share to fund the acquisition. Rowsley will also purchase 597.3 million TMCLS warrants in cash. After the acquisition is completed, Lim will own 90.1% of Rowsley, up from 45.4% now.

A whitewash waiver from the Securities Industry Council has been granted but it will be subject to the approval of independent shareholders. The waiver is to waive the obligation to make a mandatory general offer for Rowsley by Lim once the acquisition is completed.

Both Thomson Medical and TMCLS are looking to “capitalise on the increasing demand for healthcare services in the region”.

Thomson Medical has plans to grow into an integrated country-wide healthcare network by going beyond its current service offerings and opening more new specialist clinics.

Meanwhile, TMCLS wants to make Tropicana Medical Centre, its tertiary hospital at Kota Damansara, Malaysia, into one of the largest integrated healthcare campuses in Klang Valley. It plans to do so by tripling its current bed capacity. Furthermore, TMCLS has an intention to expand in Johor Bahru through the proposed Thomson Iskandar Medical Hub. The medical hub is located in Rowsley’s Vantage Bay Healthcare City, Johor Bahru.

Existing shareholders of Rowsley will be offered two bonus warrants for each existing share. A bonus warrant has an exercise price of S$0.09. For every bonus warrant exercised, a piggyback warrant can be exercised on a one-for-one basis. Each piggyback warrant has an exercise price of 12 cents per share.

If all the bonus and piggyback warrants are exercised, Rowsley would receive between S$850 million and S$1.13 billion in proceeds, which will be used to fund its future growth and working capital.

The deal is set to propel Rowsley into one of the largest listed hospital businesses in Singapore.

The following shows the market capitalisation of some of the hospital players in Southeast Asia and where Rowsley would stand:

Source: Rowsley Limited’s presentation deck

Post-acquisition, Rowsley, which would be known as Thomson Medical Group Limited, is expected to be larger than Raffles Medical Group Ltd (SGX: BSL) and Health Management International Ltd (SGX: 588). However, it would still be smaller than IHH Healthcare Bhd (SGX: Q0F).

Rowsley has a market capitalisation of S$616 million, as of Friday’s close.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Raffles Medical Group Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Raffles Medical Group Ltd.