NMC Health soars on deal speculation; H1 profit rises

NMC Health shares soared on Thursday following a report that two groups, including one backed by Chinese conglomerate Fosun, have made competing offers to buy a 40% stake in the UAE-based healthcare provider worth up to $1.9bn.

According to Reuters, the prospective purchasers are targeting a stake jointly owned by KBBO Group chairman, Khalifa Butti Bin Omeir, UAE-based businessman Saeed Bin Butti Al Qebaisi, and Infinite Investment, which was purchased for $1bn back in 2011.

Reuters cited two sources as saying that the group will pay a premium to NMC Health’s market price for the target stake, though none of the parties have officially acknowledged a bid.

Also on Thursday, the FTSE 100 company unveiled plans to launch a $200m share buyback programme and said it remained on track to meet full-year targets after it achieved revenue of $1.2bn for the six months ended 30 June, up 33% compared to the same period last year.

The jump in revenue came as sales from the maternity & fertility division rose 44% to $164.5m following the acquisition of Boston IVF, while sales jumped by 34% to $696.0m at the multi-specialty & pharmacies division.

Pre-tax profit increased 18% to $140.6m.

NMC's chief executive, Prasanth Manghat, said the business is now well positioned to establish a dominant position in the attractive Saudi Arabia healthcare market after forming a "strategically important partnership" with GOSI/Hassana Investment Company.

At 1040 BST, the shares were up 27% to 2,455p.

Berenberg said that while both the results and the share buyback programme are good news in their own right, this is overshadowed by the deal speculation.

"If confirmed, this would be a substantial positive for the company, in our view, which could precipitate a material short squeeze," it said.

Russ Mould, investment director at AJ Bell, said: "Weak share prices across the UK stock market are providing plenty of opportunities for big investors to swoop on companies with depressed valuations. We’ve seen Greene King and Cobham receive bids from foreign companies in recent months, and over the past few years since the Brexit referendum other UK names have been snapped up by overseas bidders including Berendsen and ARM.

"There will no doubt be more deals if sterling remains very weak as Brexit has effectively made it hunting season for foreign companies who see value in depressed UK assets."