NMC Health agrees two acquisitions and new O&M contract in Egypt

NMC Health has agreed to acquire a United Arab Emirates-based cosmetic surgery business, a medical centre in Saudi Arabia and agreed a new contract to operate and manage two Egyptian hospitals.

As it looks to expand its capabilities and geographic reach, the FTSE 100 group snapped up 70% stake in CosmeSurge, a 17-clinic provider of cosmetic surgery and aesthetic medicine, for $170m from a connected company of its executive vice chairman Khalifa Bin Butti. The deal is expected to complete in the current quarter.

NMC has been operating the UAE-based CosmeSurge clinics on behalf of owner Emirates Healthcare Group, which is owned by Khalifa Butti's KBBO Group consortium, since last September. NMC expects the business to deliver 2017 revenues of around $67m and EBITDA of approximately $20.5m.

Being intimately familiar with the workings of the clinics via the operations & management contract, NMC has already identified a wide number of revenue and cost synergy opportunities, including cross-referral of patients, reducing capex requirements by using the group's existing capacity and sharing costs of support services related to HR, IT and procurement.

NMC has acquired an 80% stake in Al Salam Medical Group, a healthcare company in Riyadh, the largest healthcare market in KSA. The transaction is expected to be completed in H1 2018 and includes the 100-bed Al Salam Medical Hospital (commissioned in Q4 2016), the Al Salam Medical Center (established in 1985) and the Ishbilia Medical Center (established in 2003).

The London-listed healthcare group also announced the winning of an O&M contract to manage two hospitals for Emirates Healthcare Group in Egypt, with a combined capacity of 860 beds.

The contract will generate $2m of revenues for NMC in the first year of operation, which means the O&M division is still expected to product $19m in the full year, as the Egyptian contract replaces those revenues swapped into another part of the group business from the acquisition of CosmeSurge.

The Saudi acquisition is of an 80% stake in Al Salam Medical Group, a healthcare company in the capital, Riyadh, with the deal expected to be completed before the end of the first half of 2018.

Al Salam Medical operates the 100-bed Al Salam Medical Hospital, which has been open since the end of 201, and two medical centres. .

Al Salam Medical's focus is on cardiology and pediatrics, giving NMC the idea of adding "substantial value" to the acquired assets by introducing further specialties.

"As such, NMC plans to add long-term care, cosmetics and IVF services, post the completion of the acquisition."

NMC chief executive Prasanth Manghat said the earnings enhancing transactions "fit well with our growth strategy", with CosmeSurge expanding the group's capabilities and Al Salam extending the geographic footprint in Saudi Arabia.

"We see substantial opportunities for revenue and cost synergies across both acquisitions, and the Cosmetics business in particular has the potential to be further developed into an independent business vertical at a later stage. Moreover, KSA remains a key focus market for us and despite already reaching 800 beds across existing and under-construction assets in the country, we continue to see strong growth opportunities in the Kingdom."