NMC spins off Saudi hospital assets into JV with local pension fund

NMC Health has signed an agreement to form a joint-venture healthcare platform with the investment arm of Saudi Arabia's largest pension fund, the General Organization for Social Insurance, looking to take part in the kingdom's privatisation program.

The JV would be formed through NMC contributing all of its existing Saudi-based assets and GOSI's investment in Tadawul-listed National Medical Care Company, known as CARE. GOSI will transfer a 38.9% stake in CARE, via its Hassana Investment Company arm, at a price of 70 riyal per share, implying an enterprise value multiple of less than 15 times current-year EBITDA.

With NMC's providing capacity of 664 beds from its long-term and multi-specialty care services and 825 from CARE, the combined 1,489 would make it one of the largest private healthcare operator in Saudi Arabia by beds capacity.

FTSE 250-listed and UAE-focused NMC, which had 35% of its licensed bed capacity in Saudi Arabia, said the JV has "ambitious plans" to expand and hopes to benefit from the strong growth potential of the healthcare sector in the Kingdom.

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

According to the non-binding agreement announced on Monday, the JV will seek to take majority and minority stakes in Saudi-based healthcare operators, along with acquiring operation and maintenance contracts to manage private and government sector hospitals in the country.

NMC hopes to add its operational expertise in the healthcare sector to Hassana's local market knowledge and strategic position as a long term financial investor.

"We identified KSA 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 KSA healthcare market," said NMC chief executive Prasanth Manghat.

"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 tied up the JV as it hoped to be well positioned to pick up assets as part of the kingdom's privatisation program as well as continuing to fill gaps in the market, including possible development of IVF, long-term care and cosmetics segments or the introduction of pediatric centres of excellence and cancer centres.