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THROUGH BOLT-ON ACQUISITIONS, hospital group Medi-Clinic hopes to grow its footprint in Switzerland out of the country’s fragmented healthcare industry. Medi-Clinic, which generated more than 50% of its revenue and operating profit in its last financial year from the 13 hospitals it operates in Switzerland, last month acquired a 66,7% stake in Klinik Stephanshorn through its Swiss business Hirslanden. The 85-bed, multi-disciplinary hospital is the largest private hospital in the canton of St Gallen and the only private hospital in the city of St Gallen.
Medi-Clinic announced plans to raise R1,4bn through a rights offer to fund its offshore bed expansion plans for Hirslanden.
OPPORTUNITIES
* Analysts reckon the fragmentation of the Switzerland healthcare market is a great opportunity for Medi-Clinic, and the group should grow through bolt-on acquisitions, and consolidation in areas where it’s not well represented.
* The Rupert family (which controls Medi-Clinic through Remgro) has a good grasp and understanding of the Swiss market considering their luxury goods business, Richemont, is based in that country.
* The group also has big expansion plans for its southern African region and the Middle East though the latter remains relatively small.
RISKS
* However, some analysts say the Swiss market is not as attractive as South Africa or other emerging markets. The main concern being low inflation in Switzerland, which hardly grows above 2%, meaning the scope for organic growth is limited.
* There are regulatory difficulties as well, especially with regard to obtaining licences to build new hospitals in Switzerland, although this does provide a barrier to new entrants to the market.
* While the offshore debt (R16,6bn) is ring-fenced to Hirslanden, it has introduced increased financial risk for the group.
Medi-Clinic announced plans to raise R1,4bn through a rights offer to fund its offshore bed expansion plans for Hirslanden.
OPPORTUNITIES
* Analysts reckon the fragmentation of the Switzerland healthcare market is a great opportunity for Medi-Clinic, and the group should grow through bolt-on acquisitions, and consolidation in areas where it’s not well represented.
* The Rupert family (which controls Medi-Clinic through Remgro) has a good grasp and understanding of the Swiss market considering their luxury goods business, Richemont, is based in that country.
* The group also has big expansion plans for its southern African region and the Middle East though the latter remains relatively small.
RISKS
* However, some analysts say the Swiss market is not as attractive as South Africa or other emerging markets. The main concern being low inflation in Switzerland, which hardly grows above 2%, meaning the scope for organic growth is limited.
* There are regulatory difficulties as well, especially with regard to obtaining licences to build new hospitals in Switzerland, although this does provide a barrier to new entrants to the market.
* While the offshore debt (R16,6bn) is ring-fenced to Hirslanden, it has introduced increased financial risk for the group.
