UAE-based NMC Health, a leading healthcare operator, has signed an agreement to form a joint-venture healthcare platform with Hassana Investment, a unit of pension fund General Organization for Social Insurance (GOSI) in Saudi Arabia.

The proposed JV would create one of the largest private healthcare platforms operating in Saudi Arabia today. The JV would have a strategically unique position in the country, with a strong foothold in Riyadh, the single largest healthcare market in Saudi Arabia, as well as in multiple smaller, underserved cities.

The enlarged organization is expected to benefit from economies of scale, allowing more efficient deployment of capital, increasing patient choice and optimizing returns across multiple assets.

Furthermore, in-line with NMC’s existing strategy, the proposed JV platform would continue to build a strong pan-Saudi Arabia presence, unlocking considerable synergies across its facilities in the process. These are expected to cover business segments such as revenue cycle management, procurement, HR and IT systems among others.

Key terms of the agreement

•    GOSI/ Hassana will transfer their38.9 per cent stake in Tadawul-listed National Medical Care Company (CARE) at a price of SR70 ($18.64 per share, implying an attractive 2018E EV/EBITDA multiple of less than 15x
•    NMC will contribute all of its existing Saudi Arabia-based assets as part of the formation of the JV platform
•    Under the terms of the agreement, there will be revaluation of NMC's assets, representing considerable value accretion at the joint-venture as well as NMC Health plc level
•    The JV will have a combined bed capacity of 1,489 (664 beds contributed by NMC and 825 by CARE)
•    Formation of the JV is subject to regulatory approvals and signing of definitive agreements after completion of necessary due diligence by both the parties

•    For the year ended 31 December 2017, NMC reported gross assets of US$3.0 billion and profits before tax of US$210.4million. For the same period, CARE reported gross assets of US$380.0million and profits before tax of US$26.7million

•    NMC will retain a majority stake, as well as operational control, in the JV

NMC will hold a voting majority in the proposed JV, with the exact stake subject to final terms. Consequently, NMC will fully consolidate the JV financials. NMC will also retain operational and management control of the assets held by the JV.

The proposed JV platform will serve as the main vehicle of future expansion for NMC in Saudi Arabia, said the statement from Emirati firm.

The new venture will seek to take majority, as well as minority, stakes in Saudi Arabia-based healthcare operators (organic and inorganic investments), along with acquiring O&M contracts to manage private and government sector hospitals in the country.

The JV platform is expected to benefit significantly from NMC’s operational expertise in the healthcare sector, as well as Hassana’s local market knowledge and strategic position as a long term financial investor. The formation of this platform represents the strong commitment by both NMC and Hassana towards the Saudi Arabia healthcare market.

CEO Prasanth Manghat said: "We have identified Saudi Arabia as a key strategic priority for NMC and the proposed partnership between NMC and GOSI/ Hassana would offer a tremendous opportunity for both the companies to better serve the Saudi Arabia healthcare market.”

“The Saudi government’s forward looking and investor friendly policies make the Kingdom one of the most attractive destinations in the region for investment in the healthcare sector. Moreover, Hassana’s strong commitment to the sector, particularly in the form of strategic investments, remains a vital means of attracting and developing healthcare expertise in the country.

“NMC has been the most progressive foreign entrant in the Saudi healthcare market, and the proposed partnership with Hassana would accelerate the process of bringing international best practices to Saudi Arabia," observed Manghat.

"In addition to being ideally positioned to participate in the highly anticipated privatization program in Saudi Arabia, the proposed JV platform will continue to fill service gaps in the market. This is expected to be achieved through a wide range of means, be it through the development of IVF, long-term care and cosmetics segments or the introduction of paediatric centres of excellence and state-of-the-art cancer centres,” he added.

Hassana CEO  Saad bin Abdulmohsen Al Fadly said: “The proposed partnership between Hassana and NMC is driven by our view that healthcare in Saudi Arabia is one of the most attractive markets for strong long-term growth.”

“The proposed JV has ambitious growth plans across different healthcare sub-sectors, with both partners committed to compounding returns over the long-term, whilst providing best-of-class services to patients.

“Benefiting from Hassana’s role as a strong long term financial and strategic investor and NMC’s expertise as a sophisticated and successful healthcare expert in the region, the JV platform would be well-positioned to become one of the most dominant healthcare players in Saudi Arabia and is ideally positioned to capitalize on the health care privatization program in Saudi Arabia in line with the country’s Vision 2030 initiatives,” he added. – TradeArabia News Service