Heal thyself, Medicare

Rest up and take it easy. The standard medical advice applies in the corporate surgery too. Mediclinic’s shareholders would be better served if the company focused on its own recovery, rather than writing a repeat prescription for investors in Spire.

Mediclinic says talks to acquire the rest of Spire Healthcare, a UK group in which it already owns 29%, have ended. The two failed to reach agreement on price. Mediclinic will remain a shareholder with a seat on the board. Walking away is the right course. There were insufficient synergies between Spire and Mediclinic to justify a bigger premium. The South African group is still recovering from its 2015 acquisition, the £1.4bn reverse takeover of Al Noor Hospitals, which brought it on to the London market.

The objective of combining its own business in Dubai with Al Noor’s operations in Abu Dhabi was logical. But an exodus of Al Noor clinicians and changes to the health insurance regime in the emirate resulted in a string of profit warnings. Forecast earnings for the year to March have come down by two-fifths over the past 12 months. The shares are down 25%.

Shareholders might have lower blood pressure but for the comparison with NMC Health, which floated in 2012 and also bid for Al Noor. Its shares have risen 13-fold and it joined Mediclinic in the FTSE 100 at the last reshuffle. NMC is almost exclusively focused on Abu Dhabi and Dubai, which in addition to rapid market growth, offer the tonic of near-zero corporate taxes. NMC has executed well, too — starting out by building its own facilities, then progressing to acquiring others.

Mediclinic’s own Mideast operations were growing at a comparable clip before the complex Al Noor transaction, and there is no reason why the combined business should not do so again. True, it has exposure to volatile SA, as well as slow-growing Switzerland. But greater stability on the wards in Abu Dhabi should in time lead to a recovery in the shares in London. London, November 19