Health cheques: big tech joins global giants driving up APAC medical deal sizes

Data InsightDealspeak 7 September

Health cheques: big tech joins global giants driving up APAC medical deal sizes

As Asia-Pacific (APAC) slowly recovers from its pandemic malady, the region’s healthcare service providers are treating themselves to larger-ticket deals thanks to new acquirers such as big tech companies. According to Dealogic data, average value for agreed deals has climbed to USD 90.9m in 2022 from USD 55.9m in 2021.

China is at the front of the queue in this year’s healthcare service M&A transactions, buoyed by the USD 1.5bn sale of Beijing Amcare Medical Management to a surprise buyer, Bytedance, the Chinese owner of TikTok. As the biggest tie-up in APAC so far this year, the deal offers hope to a struggling industry that continues to be stricken by virus variants and lockdowns.

Top hospital players in Southeast Asia have been consolidating, and 2022 deal value (USD 3.4bn) represents a fourfold increase over 2021 (USD 629m). Notable agreements include Malaysia-based IHH Healthcare [KLSE:5225] coughing up USD 1.35bn to acquire Ramsay Sime Darby Health Care Sdn Bhd, a 50:50 joint venture between Ramsay Health Care Ltd [ASX:RHC] and Sime Darby Holdings Bhd, as well as Singapore’s Fullerton Health Corp’s USD 1bn merger with RRJ Capital.

Big tech buys in

Bytedance made headlines by offering a 5x price-to-sales ratio valuation for China’s privately-held, high-end maternity hospital group, Amcare, according to local media reports.

At a time when the country’s anti-corruption watchdog is starting to crack down on graft and bribery at public hospitals, private hospitals have been aggressively expanding marketing initiatives by using social media to attract younger people and middle-class families.

With the help of China’s biggest short-video platform, Douyin, Bytedance could change the game by transferring massive patient resources from online to offline, says a sector investor.

Bytedance is not the only big tech player to have moved into healthcare. Tencent [HKG:0700]-backed Medlinker, an internet healthcare group, landed Future Clinics (previously known as Tencent Doctorwork) in 2021, and now runs over 70 outpatient clinics in China. Medlinker is planning a Hong Kong IPO to raise USD 400m, according to local media reports.

US-based tech giant Amazon [NASDAQ:AMZN] shelled out USD 3.9bn for 1Life Healthcare (One Medical) [NASDAQ:ONEM], a San Francisco, California-based operator of One Medical primary care facilities.

Under the microscope

A busy deal pipeline in APAC’s hospital space puts the sector in a strong position to outpace 2021. According to Mergermarket, Australian hospital group Ramsay Health Care is in talks with a consortium led by KKR [NYSE:KKR] over the latter’s cash-and-scrip proposal. KKR consortium’s initial conditional, non-binding, indicative proposal values Ramsay at AUD 28.3bn, including debt..

Singapore-based Fullerton Health Corporation is divesting China units, while Kauvery Hospital, a Trichy, India-based multi-specialty hospital chain, is seeking to sell a controlling stake in its business.

CVC Capital is preparing a process to divest its minority stake in Indonesia-based hospital operator, Siloam Hospitals Group [IDX:SILO].

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