Mediclinic’s bid to expand into the North West has been dealt a blow after the Competition Tribunal ruled against the private hospital group’s plans to acquire a rival company, reports Business Day.
The Competition Tribunal announced that it had prohibited its proposed merger with Matlosana Medical Health Services (MMHS) because it would substantially lessen competition in the region. Mediclinic still has the option of challenging the decision at the Competition Appeal Court.
The report says the tribunal’s decision highlights the conundrum facing JSE-listed private hospital groups, which include Mediclinic and its rivals Netcare and Life Healthcare. All three groups have sought to counter the limited potential for increasing their domestic footprint with offshore ventures, with varying degrees of success.
“They are caught between a rock and a hard place,” said Fairtree Capital portfolio manager Jean-Pierre Verster. “There is acknowledgement by investors that the three big hospital groups have already got a dominant position in aggregate, with almost 75% market share between them. It will therefore be increasingly difficult for them to acquire hospitals in South Africa. That is the reason why they have all gone offshore – with mixed results,” he said.
The report says Mediclinic owns private hospitals in Southern Africa, Switzerland and the Middle East, and has a minority stake in the UK private hospital group Spire Healthcare. It struggled to bed down its Abu Dhabi business and its Swiss operations have been squeezed by unexpected regulatory changes.
Netcare is still seeking a buyer for its stake in the UK’s biggest private hospital group, General Healthcare Group, after it decided to pull out of the UK in 2018, while Life Healthcare recently sold its stake in Indian hospital group Max Healthcare.
The report says Mediclinic’s plans to acquire MMHS – which owns two multi-disciplinary hospitals in Klerksdorp, a psychiatric hospital, and a nursing training school – were blocked by the Competition Commission in 2017. At the time the commission said it was recommending that the deal be prohibited because it was likely to substantially reduce competition in and around Klerksdorp and would allow Mediclinic to raise prices as soon as the transaction took effect. Mediclinic took the matter to the tribunal, and presented its final argument in mid-January.
The tribunal said it had “engaged extensively” with the merging parties to see if a potential remedy could be found to address the commission’s competition concerns, without success. It said it would provide the reasons for its decision at a later stage.
“The merging parties’ proposed remedies were canvassed with a number of medical aids that gave valuable inputs to the tribunal. However, despite different proposed remedies put up by the merging parties over several months, no appropriate remedy was tendered that would cure the substantial lessening of competition that would arise as a result of the proposed transaction,” it is quoted in the report as saying.
Mediclinic said it would comment once it had studied the tribunal’s written reasons for its decision. These must be provided within 20 days. It said it reserved its rights to take the matter to the Competition Appeal Court.
[link url="https://www.businesslive.co.za/bd/companies/healthcare/2019-01-30-competition-tribunal-blocks-mediclinics-bid-to-grow-in-north-west/"]Business Day report[/link]