Update 21 November 2023
Tomorrow the elections for the Dutch parliament are being held. Exciting times as big changes are likely with two new political parties expected to do very well. In addition to politics, there is also other news from the Dutch healthcare sector:
- Clarian / Korian in process of restructuring balance sheet. Will it sell its Dutch activities?
- Dutch Competition Authority wants to expand remit to smaller acquisitions in the healthcare sector. What are possible consequences?
- DORC for sale. Will other Dutch healthcare companies follow?
Clarian / Korian Dutch assets on list of potential disposals
As reported in the international press, Clarian (still known as Korian in the Netherlands) has suffered a dramatic decrease in its share price and needs to restructure its balance sheet. The company has announced that it will sell assets with a total value of €1 billion to strengthen its balance sheet. In the press release from Clarian “activities in Belgium and the Netherlands” are expressively mentioned, but the company is leaving all options open by not clarifying whether the plans include only real estate or also the opcos. Opinions in the market are divided with experts coming down on both sides, some claiming that only real estate will be sold and other claiming to definitely know that the opcos will also be sold.
As we showed in our bottom-up analysis of the main Dutch commercial nursing home chains in May Korian is the second biggest commercial nursing home operator in the Dutch market with fifty six locations and more than 1.100 clients across brands such as Stepping Stones, Rosorum, Het Gouden Hart, etc. Korian is approximately half the size of Orpea and almost twice as large as the next largest chains (De Herbergier and Domus Magnus). Orpea has its own balance sheet issues and for the other Dutch chains an acquisition of Korian’s Dutch activities would be a very large meal. It is therefore unlikely that one of the other chains will buy the Dutch Korian activities.
Up until now, international investors in Dutch nursing homes have only come from the south (i.e. France and Belgium). Healthcare operators from Scandinavia and Germany have expressed interest in Dutch elderly care, but have had the Dutch market fairly low on their priorities. Given the highly fragmented structure of the overall Dutch elderly care market it has been difficult to find potential targets that are sizable enough to represent an interesting investment. Korian could therefore be attractive to some of these organizations. The Korian Netherlands portfolio could also be of interest to private equity if they see a long-term potential of further profitable growth. We will keep you posted on any news.
Dutch Competition Authority wants to expand remit to smaller acquisitions in the healthcare sector
The Dutch Authority for Consumers and Markets (ACM) has the responsibility for following up on consumer interests. To ensure that these interests are not damaged by mergers and acquisitions all deals above a certain size must be presented to the ACM and can only proceed if the ACM gives permission. The ACM can only act on deals of a certain size. Given the highly regional and fragmented structure of the Dutch healthcare sector, the limits are lower for this sector than the general limits for other sectors. Last year, the ministry of health suggested that the size of deals warranting input from the ACM in the healthcare sector should be the same as other sectors as the government wanted to stimulate consolidation in the healthcare sector.
The last few years the ACM has been increasingly active in the healthcare sector, but has also had two key rulings rebuffed by courts. Now the ACM wants to be given a mandate to judge smaller acquisitions. This is based on the recent issues related to commercial chains acquiring primary care locations. The ACM also sees potential problems in chains such as Bergman Clinics and Equipe acquiring local specialized clinics as this gives the chains increased market power towards the healthcare insurance companies. Finally, the ACM also gives the example of two local elderly care companies active in the same village merging. According to the ACM this will lead to less consumer choice.
If the ACM manages to convince the government to expand its mandate to smaller acquisitions this will clearly slow the pace of the needed consolidation in the sector. The elderly-care sector is the least-consolidated part of the Dutch healthcare market, and the sector that probably is most in need of consolidation. However, an expansion of the ACM mandate will also be bad-news for other sector.
DORC for sale
DORC (Dutch Ophthalmic Research Center) was established in 1983 by employees of the Rotterdam Eye Hospital. DORC developed and manufactures apparatus for ophthalmologists. The company has been owned by a series of financial investors and is currently owned by Eurazeo. Under the four-year ownership of Eurazeo the company has grown through acquisitions and profits have doubled. Interested buyrs include other private equity companies and trade buyers. DORC is expected to be valued at approximately €800 million. The healthcare M&A market in the Netherlands has been relatively quiet in 2023, and it will be interesting to see if a successful sale of DORC is a start of a renewed boom in the sales of Dutch healthcare related assets.