{"id":568369,"date":"2020-12-28T03:57:21","date_gmt":"2020-12-28T03:57:21","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2020\/12\/28\/healthcare-mega-merger\/"},"modified":"2020-12-28T03:57:21","modified_gmt":"2020-12-28T03:57:21","slug":"healthcare-mega-merger","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2020\/12\/28\/healthcare-mega-merger\/","title":{"rendered":"Healthcare mega-merger"},"content":{"rendered":"

<\/a> Cleopatra Hospitals Group (CHG) has acquired 100% of Alameda Healthcare Group\u2019s <\/strong>Egypt assets<\/strong> in a sale and purchase agreement that would see the two healthcare service providers merge their operations in Egypt, CHG announced (pdf)<\/a> yesterday morning. The transaction will see CHG control and operate Alameda\u2019s facilities, including Dar El Fouad 6 of October, Dar El Fouad Nasr City, As-Salam International Hospital in addition to As-Salam International Hospital Katameya in New Cairo, which is expected to commence operations in 1H2021. Dar El Fouad and As-Salam hospitals will continue to operate under their existing names following the transaction. Alameda\u2019s management will report to CHG\u2019s CEO Ahmed Ezzeldin when the transaction closes in 1H2021.<\/p>\n

The merger would bring the combined entity\u2019s capacity to around 1,450 beds<\/strong>, CHG Chairman Ahmed Badreldin said, giving the group c.15% of the commercial bed capacity in Greater Cairo and about 4% of private-sector beds on a national scale.<\/p>\n

The transaction will double CHG\u2019s EBITDA post-closing<\/strong>, Ezzeldin said, while allowing the group to \u201cinvest in and introduce new therapies and services needed in Egypt while continuing to scale up our bed capacity in future projects across the country.\u201d Emerging markets private equity giant Actis has been an anchor shareholder of Cleopatra since 2019. \u201cWe are proud to be partners in the creation of this national champion that will benefit all stakeholders, and we look forward to the continued success of the Group under the leadership of Dr. Ahmed Ezzeldin and his team,\u201d said Actis partner Sherif El Kholy, who also serves on Cleo\u2019s board.<\/p>\n

CHG will fund the transaction through the issuance of loan notes to Alameda\u2019s <\/strong>shareholders<\/strong>, which will be mandatorily convertible into new CHG shares, the company said. \u201cThe new shares (which will be issued upon conversion of the convertible loan notes) will have a lock-up period of 12 months from conversion date,\u201d reads the statement.<\/p>\n

CHG\u2019s shares closed 2.41% higher<\/strong> yesterday at EGP 4.74 per share.<\/p>\n

MOVES- The transaction will see Alameda Chairman Fahad Khater become \u201ca key and <\/strong>strategic shareholder in CHG <\/strong>and will take on the role of Vice Chairman of CHG,\u201d the statement reads. \u201cAs they were when my father founded As-Salam, the delivery of world-class patient care, innovation and career advancement for all of our people will be at the top of our priority list as we come together,\u201d Khater said.<\/p>\n

But Enterprise, how much is the transaction worth? And who will own what <\/strong>post-transaction? <\/strong>The short answer: We dunno. Neither Cleopatra nor Alameda would specify a transaction value, but Bloomberg puts it at USD 450-500 mn, citing unnamed sources it says have direct knowledge of the agreement. The business information service also says Khater will own 25% of Cleo after the transaction.<\/p>\n

A source with first-hand knowledge of the transaction tells us this talk is premature<\/strong>, noting final percentages will be sorted out after both parties receive final fair value reports from an independent advisor. Either way, Khater will be a large, strategic shareholder of Cleopatra.<\/p>\n

Merger still needs the regulatory approvals:<\/strong> The transaction will require the approval of the Financial Regulatory Authority (FRA), the Health Ministry, and the Egyptian Competition Authority (ECA). Reports had emerged back in February<\/a> that the latter thought the transaction could be anticompetitive \u2014 that\u2019s a tough argument to make when the group would have just 4% of the private market in Cairo. Execution is also subject to the usual due diligence and conditions precedent.<\/p>\n

Advisers:<\/strong> EFG Hermes is acting as financial advisor to CHG while Zulficar & Partners and Freshfields Bruckhaus Deringer are counsel. ALC Alieldean, Weshahi & Partners, Matouk Bassiouny & Hennawy, White & Case and Dechert LLP are counsel to Alameda Healthcare Group, while CI Capital is financial advisor.<\/p>\n

THAT WASN\u2019T THE ONLY M&A ANNOUNCEMENT YESTERDAY as B Investments has<\/strong> agreed to sell 20% of its stake in Total Egypt<\/strong> to Total Outre-Mer for EGP 146 mn, B Investments said in a statement (pdf)<\/a>. The sale would bring B Investments ownership stake in Total Egypt to 6.38% from 7.97% before the sale. The move is in line with exit terms pre-agreed with Total at the time of B Investments Holding investment in Total Egypt back in 2013, the company noted.<\/p>\n

OTHER MAJOR M&A NEWS<\/strong> include:<\/p>\n