Netcare eyes UK firm

The acquisition comes after a period in which the country’s largest private hospital group has been constantly in confrontation with government, and competition concerns have limited Netcare’s local acquisition opportunities. The Competition Tribunal is unlikely to approve local acquisitions among rivals ‘ Netcare, Medi-Clinic and Life Healthcare ‘ given their dominance in private healthcare. In 2004, Netcare and retailer New Clicks took Health Minister Manto Tshabalala-Msimang to court over the proposed capped medicine pricing regulations. The regulations have a direct effect on hospitals, as they control med- icine prices from factory gate to pharmacy checkout, ban discounts and bonuses and limit the mark-ups that can be levied on medicines sold to patients. In the year to September, government measures to control medicine prices knocked about R40m off Netcare’s profits as sales in its retail pharmacies declined. This week’s announcement will see a consortium, including Netcare and three UK-based financial and property investors ‘ Apax Partners Worldwide, London and Regional Properties and Brockton Capital ‘ wholly acquire GHG for ‘2,2bn. Netcare will invest ‘217m and its wholly owned subsidiary, Netcare Healthcare UK, for a 50,1 percent holding in GHG, raising the capital via new debt facilities provided by Dresdner Bank. The consortium will provide the remaining funds and debt financing provided by Barclays Capital raised within GHG on a non-recourse basis to Netcare SA. Netcare CEO Richard Friedland confirmed the healthcare group would retain its JSE listing with a medium-term view to separately listing the UK business on the London Stock Exchange. The acquisition expanded the Netcare footprint to 120 hospitals across the UK and SA and opened opportunities for expansions into southern Europe. The unconditional acquisition is expected to be effective by May 12. Netcare has obtained irrevocable support from shareholders owning more than 50 percent of the stock. Friedland said GHG was the largest provider of private acute care in the UK, with a 25% market share, meaning the acquisition placed Netcare among the largest in the world outside the US. GHG’s geographic spread meant the group reached a higher proportion of the medically insured population than similar businesses. The UK group has 49 hospitals and 2400 beds, with facilities and a doctor base that enables GHG to offer a comprehensive range of medical and surgical services. In the year to December, GHG reported gross revenue of ‘612m. Friedland said the deal would not detract from Netcare’s local operations, with the group remaining “fully committed” to providing affordable, quality healthcare to an increasing number of citizens. Friedland said the dual elements of an ageing British population and the National Health Service (NHS) outsourcing programme afforded Netcare a sound UK platform. The group is fulfilling a five-year contract to perform 44500 cataract operations on behalf of the NHS . Friedland said management would also work closely with the South African government and other stakeholders to find suitable products and services to boost local healthcare. The acquisition allowed Netcare to leverage intellectual property through the introduction of certain operating skills and practices, as well as ancillary healthcare businesses across GHG.

May 2006
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