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FTSE 350: Consolidation ahead for healthcare services

Could it be another year of mergers and acquisitions across the healthcare services and equipment sector?
January 28, 2016

Last year was a busy one for this end of the healthcare sector, confirming the City's suspicions that the market is ripe for consolidation. One of the defining events of the year was South African group Mediclinic's approach for Dubai-based hospital operator Al Noor (ALH). That irked Al Noor's closest rival, NMC Health (NMC), which also runs hospitals across several regions in the Middle East. NMC tried its best to come up with a counter offer that was good enough, but apparently to no avail: Al Noor and Mediclinic have recommended the combination to their respective shareholders.

What Mediclinic managed to do was simply draw attention to the 30 per cent stake that its largest shareholder, Remgro, has in London-listed Spire Healthcare (SPI). Between them, Remgro and Mediclinic's intent is clear: they want to grow the group's global portfolio of companies outside of South Africa, and they could make a bid for the British hospital operator at some point. In the short term, that seems unlikely as the Al Noor tie-up hands it a much-desired London market listing. But Spire would be a cheaper buy than Al Noor, so there's reason for Spire shareholders to hope for a deal at some point.

There's been speculation surrounding a possible bid for US orthopaedics group Smith & Nephew (SN.). Whether that will finally happen seems less and less likely - reflected in a share price that's spent much of the past year behaving fairly erratically. It seems chief executive Olivier Bohuon is focused on the job at hand instead, setting about reframing the company as an acquirer rather than a target. Smith & Nephew bought surgical robotics company Blue Belt Technologies last October for roughly £180m to help it expand into robotics-assisted surgeries.

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