Update 18 February 2020
Last week we had Storm Ciara and in the weekend Storm Dennis crossed the country and apparently Storm Ellen is on her way. No real winter temperatures, but certainly winter winds. In this update a lot of news this time on acquisitions and planned sales.
- Bergman Clinics in the news. To be acquired or looking for a new investor?
- Korian is now the largest commercial provider in the Dutch elderly care market. What will Orpea do?
- Dutch maternity care sector. Crisis or opportunity?
Bergman Clinics in the news
In the update of 21 January we reported that Bergman Clinics was in the process of being sold. Last week Bloomberg also announced a sales process and claimed that the expected sales price was €1 billion. Private equity is definitely interested as I have had a large number of calls where different interested parties have wanted to get an initial overview of the Dutch healthcare sector in general and the private clinics market specifically.
In a recent interview in one of the leading Dutch newspapers, the CEO of Bergman Clinics (Hans van de Heijden) gave a number of new insights:
- They have hired JPMorgan but the goal is not a total sale of the company. While NPM (the minority shareholder) might sell, the Malenstein family does not intend to sell
- The value suggested by Bloomberg (€ 1 billion) is ridiculous
- The goal is to get a new shareholder that will help finance further growth with Germany being the prime target.
Rumours on the street say that the official process will take place in April. This is a delay from earlier plans. The delay is due to an ongoing acquisition in Germany.
Korian makes large acquisitions
Korian has been active in the Dutch elderly care market since April last year with its acquisition of Stepping Stones. When acquired Stepping Stones had 260 apartments and a considerable pipeline of new developments. Korian has now increased its Dutch footprint considerable thru two acquisitions.
One of the acquisitions is Het Gouden Haart. This is a family-owned operator with three operational locations and six projects in the pipeline. In total the nine locations will have 250 apartments.
Korian has also acquired two thirds of the assets of Ontzorgd Wonen, the troubled elderly care provider we last wrote about in December. The eleven locations acquired by Korian have approximately 470 apartments, revenues between €30-40 million, and 700 employees. The acquired locations are a mixture across the different sub-brands of Ontzorg Wonen. It appears that Korian has cherry-picked fairly large high-quality locations that fit the in the footprint of existing and planned Stepping Stone locations. The quality of acquired locations and service offering will in many cases be considerably lower than that of Stepping Stones. It will be interesting to see whether the acquired locations are rebranded to Stepping Stones or whether a choice will be made for another brand.
This definitely makes Korian the largest commercial provider of elderly care in the Dutch market. It will be interesting to see what Orpea will do. Will it try to regain its position as Nr.1? This will be a challenge as the pool of (larger) acquisition targets is pretty small.
It will also be interesting to see what will happen to Ontzorg Wonen / The Blueprint Group. The asset sale should solve their short-term liquidity issues and hopefully the remaining employees will now get their salaries on time. The management of Ontzorgd Wonen claim that they want to regrow the company to 30-40 locations in the next three years. Hopefully cash management will now have a higher priority.
Crisis in Dutch Maternity care sector
Dutch maternity care is very high quality and the sector is relatively large with more than 9.000 staff and a number of commercial actors. The sector is in crisis-mode, and the Ministry of Health has requested that insurance companies substantially increase the fees being paid for maternity care.
According to data provided by the branch organization (Bo Geboortezorg) the five largest organizations have been loss-making for the last three years. The largest maternity care organization (Zorg in Nederland) narrowly escaped bankruptcy last week. The main reason for the mismatch between revenue and costs is an extremely high level of sick leave (average 13%). This, and high turnover, is caused by unattractive work hours and low pay.
In a study a few years back we advised a client not to acquire one of the largest Dutch maternity care operators due to its unattractive position in the value chain and an unattractive cost structure. However, Zorg van de Zaak, acquired the maternity care activities of Careyn in 2018. Maybe this is an attractive sector to invest in if fees are increased and an investor has an appetite for a turn-around situation.