UAE hospital operator gets serious investor attention in possible Aster stake sale

Dubai: Will Aster DM Healthcare, one of the largest hospital operators in the UAE, sell a majority stake in the company?

Speculation over a possible sale in the UAE and Gulf healthcare sector has come despite a succinct statement from Aster’s founder Dr Azad Moopen that while it is considering a group-wide “restructuring” nothing else has been decided more and more.

But that wasn’t enough to calm down and discuss what this might mean for the UAE’s healthcare sector as a whole.Because investors are clearly showing a clear interest in this space, as in IPO of Burjeel Holdings And subsequently listed on ADX. The frenzy of investor excitement was also fueled by the possibility of a second Abu Dhabi-based healthcare operator considering a listing.

So why is the UAE’s hospital and clinic space so interested in a potential new wave of investors? What the market is seeing now stands in stark contrast to what happened pre-Covid, when healthcare providers and bankers said there was too much capacity compared to the needs of the population base.

Fast forward from the Covid phase to now and everything has changed.

“Investors want to understand the huge growth potential in healthcare in the UAE, Saudi Arabia and other Gulf economies,” said one fund manager. “More hospital operators are likely to go public, and those that are not will find institutional investors ready to pay for a stake.”

Besides Aster, another serious candidate remains NMC Healthcareis now owned by a consortium of creditors led by ADCB.

Notably, investors want stakes in existing operators rather than building new hospitals themselves. Dr. Raza Siddiqui is Executive Director of RAK Hospital and CEO of Arabian Healthcare Group. “Investing in existing healthcare assets is not surprising,” he said. “The design and development of new hospitals is a huge challenge – the Ministry of Health has updated these guidelines (which new hospitals must follow).

Dr. Siddiqui’s views are widely shared among healthcare-focused businesses. “Building new hospitals will take time, and even longer, to deliver returns unless operators receive significant government investment and support,” said the operator of a popular clinic network in the UAE.

“At the same time, existing hospital operators need new capital — preferably equity rather than new debt — to continue to scale their interests. The healthcare business is a costly business.”

And then there’s another big advantage — all the processes of an established hospital are already in place. This is very important for investors who want to get a return on their investment in the best possible time. “These hospitals already have partnerships with insurance companies, which is a major advantage,” Dr. Siddiqui said. “Because if you open a new hospital, it will take at least 2 years or more to get approval from the leading insurance companies.

“One of the largest health insurers in the UAE currently requires any hospital to be operational and successful for at least two years. That’s a big ask.”

The UAE and Gulf healthcare sector is ripe for deals, according to a senior Alpen Capital official. A key factor is the demographics of these countries. “In the UAE, for example, the proportion of the population over 50 years old will reach 21 percent in five years from 15.8 percent now,” said Krishna Dhanak, managing director.

This helps to continue to invest in healthcare – remember that the UAE will soon have mandatory health insurance for all. It will create its own wave of medical demand among the wider population.

– Krishna Dhanak, Alpen Capital

“Education and healthcare have been two of the most resilient sectors in the Gulf region in recent years. That’s why names like Abu Dhabi’s Aldar are proving to be big players in healthcare assets to grow their residential and commercial invest.”

Consolidation and new investment activity in the UAE healthcare sector will continue to be bullish in the long run.Influx of foreign investment, changing demographics, aging population, and increasing burden of chronic lifestyle diseases will drive healthcare spending

– Vikas Katoch, Founder and CEO, Sidra Healthcare

All of this suggests that, in the context of the UAE M&A scene, discussions about a stake sale in Aster will continue to heat up. At some point in the future, the business around NMC Healthcare will also revive — and that will be the jackpot.