NMC Health (NMC) plans to create a new national healthcare company in Saudi Arabia after announcing a non-binding deal to form a joint venture with Hassana Investment.
Hassana Investment is part of the General Organisation for Social Insurance (GOSI), the biggest pension fund in Saudi Arabia, which has an investment in National Medical Care (CARE).
If the agreement is approved by regulatory authorities, it will create one of the largest private operators in the country with a combined 1,489 beds.
Shares in NMC received a 4.8% shot in the arm to £36.
NMC says the joint venture will help strengthen its presence in Riyadh and serve smaller cities by driving expansion through the acquisition of existing healthcare operators based in Saudi Arabia.
The company also has its sights set on acquiring operation and maintenance contracts and hopes to benefit from economies of scale and synergies.
NMC will benefit from a co-investment partner to implement growth ambitions in Saudi Arabia, which could mitigate some investment risk as GOSI will maintain an indirect stake in CARE.
HOW WILL THE JOINT VENTURE WORK?
Under the agreement, GOSI will transfer its 38.9% stake in CARE for SAR70 per share and NMC will contribute its assets based in Saudi Arabia.
According to NMC, it will hold a voting majority and keep operational and management control of assets under the joint venture.
One analyst believes NMC could benefit from earnings upgrades of approximately 3%, but is awaiting final terms of the joint venture before changing any forecasts.
