The Scottish Mail on Sunday
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Return of private equity ‘Barbarian at the Gate’ may trigger deals rush
AMERICA’S most powerful private equity firm has held talks with senior executives at NMC Health about a £2billion plus takeover of the embattled hospital operator.
City sources told The Mail on Sunday that KKR – the former owner of pharmacy giant Boots that was immortalised in the bestselling book Barbarians At The Gate – discussed the possible buyout with NMC Health’s management team in the past few weeks.
The news emerged as the care provider battles allegations over its accounting practices and claims that its finances pointed to possible ‘fraudulent asset values and theft of company assets’.
One source said discussions are ongoing, but the company’s volatile share price has made it difficult to agree a price.
KKR’s interest in NMC Health suggests the powerful private equity firm has rekindled its interest in London-listed companies amid hopes that political stability is returning after several years of wrangling over Brexit.
If an agreement can be reached on NMC Health, the takeover could fire the starting gun on a wave of dealmaking in the City this year.
KKR has already spent billions of dollars investing in healthcare assets in the US. It paid $2.8billion (£2.2billion) in 2017 for WebMD, the health information provider.
The private equity firm also paid $10billion for the Envision Healthcare Corporation, an American hospitals group, in 2018.
Then last year, reports emerged that it was examining a $70billion buyout of Walgreens Boots Alliance – the owner of Boots – in what would be one of the largest ever debt-fuelled buyouts.
NMC Health, which is headquartered in Abu Dhabi, operates private hospitals and fertility clinics in 19 countries, including the UK.
Sources said KKR may face competition from other US-based private equity firms for NMC Health. Apollo, led by Leon Black, has talked to NMC Health about a variety of deals, varying from purchasing a stake in the business to buying the whole group.
NMC Health’s shares have crashed since Muddy Waters, an investor research firm led by shortseller Carson Block, published a critical report that raised red flags over its accounting practices.
The sustained criticism from Block’s firm has knocked the former blue chip medical company out of the FTSE100. On Friday, NMC Health was worth just £1.5billion after it lost 46 per cent of its value in a week. Short-sellers including Block an make huge profits when share prices crash.
The healthcare company’s shares were also hit when two UAE-based billionaires, Saeed and Khalifa Bin Butti, were forced to sell some of their investment in NMC Health by their lenders, Deutsche Bank and Credit Suisse, to cover loans.
Reports last week suggested NMC Health’s Indian founder, Bavaguthu Raghuram Shetty, 77, was seeking to take control of the remainder of their shareholdings in NMC Health and return to an ‘active leadership position’ at the embattled group.
KKR was founded in 1976 by Wall Street legend and former Bear Stearns banker Henry Kravis. It became famous for its takeover of US tobacco and food conglomerate RJR Nabisco in 1988, documented in the Barbarians At The Gate book and later in a film of the same name. The $25billion takeover of
RJR Nabisco was the largest buyout in history at that time.
In 2007, KKR bought Londonlisted Alliance Boots for £12billion at the height of the credit-fuelled takeover frenzy before the financial crisis. It later sold the Boots owner to pharmacy giant Walgreens. Last week, it was reported KKR had hired advisers from JP Morgan to weigh an $8billion takeover bid for haircare brands Clairol, GHD and Wella.
Coty, the US-listed cosmetics manufacturer, said in October that it would seek to offload its professional beauty and nail products divisions as part of a simplification of the company. NMC Health has vigorously denied the allegations made by Muddy Waters. But it has set up an independent review committee and has appointed former FBI director Louis Freeh to report on the claims.
NMC Health, Apollo and KKR declined to comment.