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Abu Dhabi, UAEFriday 22 June 2018

Mediclinic abandons takeover of UK's Shire Healthcare

South African hospitals group says neither side could reach agreement after weeks of talks

The Mediclinic heart hospital in Pretoria.  The company has abandoned its takeover of Shire. Alexander Joe/ AFP
The Mediclinic heart hospital in Pretoria. The company has abandoned its takeover of Shire. Alexander Joe/ AFP

Mediclinic International dropped plans to buy the rest of Spire Healthcare Group after its own investors and the UK private hospital operator spurned a deal that would have valued the target company at about £1.27 billion (Dh6.18bn)

The South African hospital operator said the two sides were unable to reach an agreement following a month of talks after its October 18 proposal was rejected as too low. Mediclinic had made another bid on November 17, suggesting a premium of about 37 per cent over Spire’s trading price before the first offer was made, which was also rebuffed.

The decision to walk away was announced days after the South African company indicated that the slump in its own stock since the transaction was proposed would be a factor in determining its future steps. Shares of Mediclinic, which owns almost a third of Spire, have dropped almost 14 per cent

following the offer amid concern that the company does not have the bandwidth for another large transaction before it fully digests earlier deals.

“Mediclinic is disappointed,” the company said London. The company “will continue to take a disciplined approach to capital allocation to ensure investments are in the best interests of Mediclinic shareholders”.

The hospital operator faced a 5pm Monday deadline in London on the deal, under UK law, and was required to make a firm bid or abandon the effort.

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Read more:

Britain’s Spire sees shares rise after rejecting £1.2bn Mediclinic takeover

NHS malaise a tonic for South African firms

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The company had raised its offer to 315.5 pence a share from 300 pence apiece, the UK company said on Monday. Spire’s shares have soared 17 per cent in London since October 17, the day before Mediclinic made its first offer.

The takeover would have been the swan song for the chief executive Danie Meintjes, who has transformed Mediclinic through a series of acquisitions in Africa, the Middle East and Europe during his tenure. Mr Meintjes, who plans to step down in July, began investing in Spire in 2015 to tap growing demand for private health services as the UK’s state-run National Health Service comes under increasing budgetary constraints. His recent transactions include the purchase of The UAE-focused Al Noor Hospitals Group assets for about US$10.2bn in February 2016, and a takeover of Swiss hospital Linde Holding Biel for $112 million earlier this year.

The UK’s proposed split from the European Union in 2019 may provide an opportunity for companies such as Johannesburg-listed Netcare and Mediclinic to pick up the slack in offering critical services to the ageing British population.

Reduced labour mobility and a drop in the national income used to fund public services are likely to bring additional pressures on the nation’s underfunded, overcrowded health-care system following Brexit.