Life Healthcare on the prowl

LIFE Healthcare Group was ready to pay up to $1 billion (R14bn) on a European acquisition, its chief executive said, as South Africa’s second-biggest private hospital company chased growth outside its home market.

Stiff competition and flagging economic growth have pushed South African private hospital groups to broaden their horizons by expanding in Europe, the Middle East and India.

A market inquiry by the Competition Commission, which is examining pricing and competition in the sector, is also clouding domestic prospects.

Life Healthcare has been slower off the mark than rivals Mediclinic International and Netcare, but it is loosening the purse strings in an effort to increase revenue from outside its core market to 20 to 30 percent of group revenue by 2020.

“We think the transaction size will be in the order of R8bn to R14bn,” chief executive Andre Meyer said after the company’s inclusion in the JSE’s benchmark Top40 index yesterday.

Mediclinic, which entered the United Arab Emirates with its acquisition of Al Noor Hospitals last year and holds 29.9 percent of Britain’s Spire Healthcare, sources more than 60 percent of its profit from outside South Africa. Netcare, meanwhile, runs Britain’s biggest private hospital network, BMI Healthcare.

Though Life Healthcare has invested in India and Poland, the group still earns 95 percent of its revenue and 98 percent of profit in South Africa, where economic growth is forecast to be barely positive this year.

“We think in India we have a fiveyear horizon to see really good earnings,” Meyer said, citing a growing middle class in the world’s second most populous nation as a key factor.

Meyer said his company wanted to buy a more mature business that had both scale and growth potential. It was only interested in European markets where business could be conducted in English, he said, adding that this included Germany, the Netherlands, Belgium, the UK and Ireland.

“We actually think Brexit has given us an opportunity to pick up a good asset at a more acceptable multiple,” Meyer said. “We’re not chasing anything and everything that is for sale,” he added. – Reuters