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NMC Healthcare is considering withdrawing from the US$2.2 billion bidding contest for its London-listed rival Al Noor Hospitals, The National can reveal.
NMC, which last month signalled its intention to outbid an agreed merger between Al Noor and South Africa’s Mediclinic, is believed to be worried that it might get drawn into an expensive auction that would harm its credit and investor ratings, according to people familiar with the situation.
“They are getting more worried that they would have to raise a lot of debt or ask shareholders to fund a big deal,” said one bank source who asked not be named as the information was not in the public domain.
If NMC decides to pull out of the bid, it would require a public announcement to the London Stock Exchange. An NMC spokesman declined to comment.
NMC’s hesitation about a bid for Al Noor comes soon after news that another potential bidder, VPS Healthcare, had upped the stakes by hiring Deutsche Bank, regarded as UAE health industry specialist, to weigh up its options, including a rival bid.
If NMC quits, it would leave the field open for a straight fight between Mediclinic and VPS. It might also open another possible scenario being discussed by investment bank advisers - a merger between VPS and NMC to create a “national champion” in the UAE hospitals business.
NMC’s second thoughts about a bid for Al Noor are prompted by concerns that it would have to raise cash – either by increased bank borrowings or a rights issue – to stand a realistic chance of winning over Al Noor shareholders who have pledged 34 per cent of its shares for the Mediclinic proposal, which has also been recommended by the Al Noor board.
Matthew Menezes, analyst at Citibank’s South Africa office, said: “An all-cash offer by NMC looks challenging given that a significant rights issue would likely be required and we are unsure about NMC’s shareholders’ ability to follow a rights.” Core NMC shareholders have 67 per cent of the equity.
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