By Dinesh Nair and David French
Two of Saudi Arabia's largest private hospital groups will seek to list their shares on the kingdom's bourse next year, banking sources aware of the matter said, aiming to capitalise on investor interest in the fast-growing healthcare sector.
Healthcare businesses in the Gulf Arab region are expected to boom in coming years on the back of rising wealth coupled with an increase in so-called lifestyle diseases. Five of the six Gulf nations are in the global top 10 for prevalence of diabetes for instance, according to the International Diabetes Federation.
Healthcare spending in Saudi Arabia is set to increase to around 174 billion riyals ($46.4 billion) in 2017 from 68.7 billion in 2010, according to a November 2012 report from Riyadh-based NCB Capital.
Seeking to harness such demand, Sulaiman Al-Habib Medical Group (HMG), one of the largest private providers of healthcare in the Gulf Arab region, has appointed the investment banking arm of Banque Saudi Fransi to assist with a planned share sale, the two Saudi banking sources said, speaking on condition of anonymity as the matter had not been made public.
HMG later confirmed the mandate in a statement, which quoted Dr. Sulaiman Al-Habib as saying: "The initial public offering (IPO) is a major step and an important part of our strategy that aims to expand the shareholder base and public participation in the company's investments and earnings, thus, continuing its growth and expansion."
Almana General Hospitals (AGH), focused on the kingdom's Eastern Province, also wants a listing on the local bourse and has appointed GIB Capital, the investment banking arm of Gulf International Bank, to help with the process, according to the sources.
HMG's IPO is likely to be the largest for an established private company in Saudi Arabia since investment firm Kingdom Holding in 2007, one of the sources said. Kingdom, now worth $21.5 billion, had floated 5 percent of the company to raise 3.23 billion riyals.
HMG operates 14 medical facilities across Saudi Arabia, the United Arab Emirates and Bahrain, including seven hospitals and six medical centers. It also owns the Olaya Medical Centre in Saudi capital Riyadh, consisting of about 300 medical centres.
Fast track
AGH had a net income of between 100 million and 150 million riyals ($27-$40 million) in 2012 and the business could be valued at 13 times that figure, the first source said. It operates facilities in regions such as Dammam, Khobar, Jubail and Hofuf.
An AGH spokesman was not available for comment.
Both companies are expected to list in the latter part of 2014 or early 2015, both sources said, with their applications set to be fast-tracked by the authorities. No details were yet available on what amount they were likely to raise but both would offer around 30 percent of their shares to the public.
"Saudi regulators would like to see more healthcare IPOs coming to the market, so it's unlikely that these companies will have a long waiting period like some of the other firms," the first source said, adding the increased diversification of a bourse dominated by petrochemicals and banks would be of benefit to investors.
However the source also said planned government-led healthcare projects in the kingdom may curb the profitability of private operators in future.
Saudi Arabia's stock market, whose constituents have a combined market value of about $430 billion, is the largest in the Gulf Arab region and the most active for IPOs. However it is not yet fully open to international investors and share issues are usually priced at a significant discount to benefit local citizens.
Outside the kingdom, UAE-based Al Noor Hospitals and NMC Healthcare have sold shares in London in the last 18 months and are around 48 and 71 percent up on their IPO prices, respectively.
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