NMC sus­pends chair­man from board dis­cus­sions amid re­view

Muscat Daily - - BUSINESS -

Geneva, Switzer­land – NMC Health Plc, the op­er­a­tor of the big­gest net­work of hos­pi­tals in the United Arab Emirates, said its chair­man will be re­moved from board dis­cus­sions af­ter he said he may have mis­re­ported the size of his stake.

Chair­man Bav­aguthu Raghu­ram Shetty is con­duct­ing a le­gal re­view into the size of his stake, NMC said on Mon­day. The com­pany is ask­ing its main share­hold­ers for clar­ity on whether they have pledged any of their hold­ings as col­lat­eral, amid spec­u­la­tion in the mar­ket they may have faced a mar­gin call.

The stock, which lost al­most half its value last week, gained 6.4 per cent at 1.00 pm in Lon­don.

The con­trol­ling share­hold­ers ‘have lost their cred­i­bil­ity with in­vestors’ and there­fore dis­tanc­ing them from the board is a pos­i­tive move, said Ab­dulla Nahlawi, an an­a­lyst at Ras­mala In­vest­ment Bank in Dubai.

Mon­day’s dis­clo­sures com­pound the tur­moil sur­round­ing NMC, which has been the tar­get of short seller Muddy Waters Cap­i­tal LLC since De­cem­ber.

The com­pany is con­duct­ing an in­de­pen­dent re­view af­ter that firm al­leged that the com­pany ma­nip­u­lated its bal­ance sheet and in­flated the prices of as­sets it pur­chased.

“What we found is likely just the tip of the ice­berg,” Carson Block, the founder of Muddy Waters, said by email. “As for the no­tion that NMC might re­ceive pri­vate eq­uity bids, it’s hard for us to be­lieve they would sur­vive due dili­gence.”

NMC has asked Shetty and vice chair­man Khaleefa Butti Omair Yousif Ahmed al Muhairi not to at­tend any board meet­ings

un­til the size of their stakes is clar­i­fied. The com­pany said the board will make a de­ci­sion about whether Shetty and Butti should re­main as com­pany di­rec­tors. The news about founder Shetty’s stake in­creased spec­u­la­tion that NMC’s big­gest share­hold­ers faced mar­gin calls and have been forced to sell shares.

The com­pany said Kohlberg Kravis Roberts & Co and GK In­vest­ment made ‘highly pre­lim­i­nary’ ap­proaches, fol­low­ing a re­port in the Mail on Sun­day that said KKR held talks with NMC in re­cent weeks about a £2bn takeover but couldn’t agree on the price.

The hos­pi­tal op­er­a­tor said nei­ther party made any offer and no terms were dis­cussed. Ludo Bam­mens, a spokesman for KKR, wasn’t im­me­di­ately avail­able to com­ment.

Lon­don-listed NMC’s shares have fallen more than 70 per cent since the Muddy Waters re

port came to light in De­cem­ber, leav­ing the com­pany a mar­ket value of less than £1.5bn. The com­pany has said the al­le­ga­tions are false and mis­lead­ing.

In­suf­fi­cient dis­clo­sure of re­lated-party trans­ac­tions, ma­nip­u­la­tion of the bal­ance sheet and in­flated as­set pur­chases are some of Muddy Waters’s most se­ri­ous al­le­ga­tions.

NMC’s US$107mn re­de­vel­op­ment of NMC Royal Women’s Hos­pi­tal in Abu Dhabi ‘con­tains nu­mer­ous red flags’, the short seller said. NMC also ap­pears to have paid too much for a stake in Premier Care Home Med­i­cal and Health Care LLC, the re­port al­leged.

NMC’s mar­gins are ‘too good to be true’ rel­a­tive to peers, Muddy Waters said at the time. “We are un­sure how deep the rot at NMC goes, but we do not be­lieve that its in­sid­ers or financials can be trusted.”

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