Indonesia Billionaire Family Reshuffles Empire on Currency Rout

(Bloomberg) -- Southeast Asia’s billionaire Riady family is reshuffling its health-care holdings as its core property business grapples with the emerging-market rout.

OUE Lippo Healthcare Ltd., a hospital operator backed by the family, agreed to buy 10.6 percent of Singapore-listed First REIT, according to a statement Tuesday, which confirmed an earlier Bloomberg News report. It will buy the stake for about S$103 million ($75 million) from PT Lippo Karawaci, an Indonesian developer controlled by the Riadys, it said in a Singapore exchange filing.

The company plans to raise about S$150 million in a rights issue to fund the purchase, the filing shows. OUE Lippo Healthcare will offer existing investors 1 new share for each share they already own at 6.75 Singapore cents apiece, representing a 28 percent discount to the stock’s theoretical ex-rights price.

“The proposed acquisitions will bring three key benefits to OUE Lippo Healthcare’s long-term strategic goals,” OUE Lippo Healthcare Chairman Lee Yi Shyan said. “They enable the company to diversify into a key healthcare market such as Indonesia. Further, they fit well with our asset-light growth model, and thirdly, they are earnings accretive.”

Medical Market

Indonesia’s healthcare market is expected to reach $32 billion in revenue by 2022, according to data released earlier this year from Ken Research, as more medical services become available for the first time to those living in underdeveloped and rural areas. A population that’s living longer is boosting demand for prescription sales and new drugs, while a rising middle class means people are spending more on their physical well being.

OUE Lippo Healthcare and its controlling shareholder, OUE Ltd., will also buy full control of First REIT’s manager for a total of S$99 million. OUE Lippo Healthcare will get a 40 percent stake in the manager, while OUE will hold 60 percent, according to the filing.

First REIT has a portfolio of about 20 healthcare-related properties spread across Indonesia, Singapore and South Korea. Based on its 2017 financial results, the deal is expected to result in a distribution of about S$7.1 million to OUE Lippo Healthcare and its subsidiaries.

Moody’s Warning

Oversea-Chinese Banking Corp. is sole financial adviser to OUE Lippo Healthcare on the acquisition, as well as manager of the proposed rights issue.

Moody’s Investors Service warned earlier this month that Lippo Karawaci is among Indonesian companies that are most vulnerable to weakness in the local currency. Lippo Karawaci’s debt is largely denominated in dollars while its cash flow is in rupiah, and additional weakness in the currency could have economy-wide effects, according to Moody’s.

Lippo Karawaci’s President Director Ketut Budi Wijaya said the transaction would improve the company’s liquidity substantially. The funds will “ultimately strengthen Lippo Karawaci’s balance sheet and further enhance its cash flow,” he said in a statement.

Stock in Lippo Karawaci declined 3.3 percent to 352 rupiah in Jakarta as of 1:42 p.m. local time. OUE Lippo Healthcare, OUE and First REIT were halted from trade before the announcement.

©2018 Bloomberg L.P.