Abu Dhabi-based Al Noor Hospitals said this week it plans to sell shares on the London Stock Exchange, a decision that highlights the challenges still faced by private companies looking to sell stocks in the Gulf.
Despite a strong rebound in the local stock markets, companies such as Al Noor Hospitals – the second local health company to do so in the last year – are still opting to list outside of the region.
“We explored all the options open to us,” says Sami Alom, chief strategy officer at Al Noor, which has hired Goldman Sachs, Deutsche Bank, HSBC and Rothschilds for the deal. London “offers the right liquidity, access to international investors and the regulatory standards.”
The medical group – valued at an estimated $1bn – is pursuing a free float of 30 to 45 per cent as it starts its investor roadshow in two weeks’ time. It plans to raise more than $150m in the share sale, predominantly for future acquisitions.
Gulf equity capital market activity has remained muted since the onset of the financial crisis. Initial public offerings in the Middle East and north Africa increased in the first quarter to $1.6bn but that was only three share sales – one large sale in Iraq and two much smaller offerings in Saudi Arabia.
While the inner workings of Al Noor’s three hospital and nine medical centres will be unfamiliar to global equity investors, the company is betting on the lure of the lucrative Gulf healthcare industry to attract foreign investors.
And precedent bodes well for the company. Those who bought into NMC Healthcare– the first Abu Dhabi company to seek a premium listing on the London Stock Exchange – have seen returns of more than 50 per cent this year. Abu Dhabi’s stock market has gained slightly more than 30 per cent year-to-date.
As it stands, Al Noor is owned 15 per cent by its founder Dr Kassem Alom and 35 per cent by Sheikh Mohammed bin Butti al-Hamed. The remainder is held by Ithmar Capital, a Dubai-based private equity firm that invested in 2010.
The group will now be exposed to a higher degree of transparency – such as publishing earnings reports and being held accountable to shareholders – a factor that has deterred other local companies from going ahead with IPOs.
As one of the leading private operators of local hospitals, the company benefited from the government’s decision several years ago to implement emirate-wide insurance for nationals – allowing them to opt for private hospital treatment at no additional cost to themselves.
“If you look at the healthcare market in Abu Dhabi it’s growing at a very fast pace,” says Mr Alom. Three key factors are driving the expansion, he adds: an ageing population, high incidents of lifestyle conditions such as diabetes and obesity and the fact that service gaps still remain.
Gulf countries are among the world’s worst sufferers of diabetes, which itself is linked to other recurring ailments that convert into revenues for the region’s healthcare providers.
The company – which is valued at about $1bn – said it reported a 19 per cent increase in profit in 2012 to $60.5m, while revenue increased to $324.4m.
Competition, however, may be heating up in the UAE. The emirate is set to open its own multibillion-dollar branch of the Cleveland Clinic in coming years and other hospitals such as NMC Healthcare are also expanding.
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