June 22, 2015 / 2:23 PM / 3 years ago

South Africa's Mediclinic to buy into Britain's Spire in $700 million deal

JOHANNESBURG (Reuters) - South African hospitals group Mediclinic International MDCJ.J is buying almost a third of Britain’s Spire Healthcare (SPI.L), entering a market it said was ripe for growth as private players account for a small fraction of the healthcare sector.

The deal, worth about $700 million, would also see Mediclinic continue its diversification outside its home market where a government probe into private hospitals and a mooted national health insurance plan is limiting growth opportunities. It already runs hospitals in Switzerland and the Middle East.

Shares in the company, South Africa’s biggest private hospital group, were up 3.36 percent at 103 rand at 8.50 a.m. EDT. Spire surged 9.7 percent to 3.51 pounds, on course for its biggest daily percentage gain on record.

Spire is Britain’s second-largest private hospital operator. Mediclinic will buy a 29.9 percent stake in the firm from its own largest shareholder, South African investment house Remgro Ltd (REMJ.J).

Remgro had said earlier on Monday, in a joint statement with Spire, that it was buying the stake from buyout firm Cinven for 431.7 million pounds ($686 million). It will then sell the stake to Mediclinic, of which it owns about 40 percent, for 8.6 billion rand ($709 million).

Remgro’s strong balance sheet and its relationship with the South African Reserve Bank would help conclude the deal more quickly than had the private hospital group gone it alone, said Mediclinic Chief Executive Danie Meintjes.

Meintjes said he regarded Britain as a growth opportunity due to an aging population and the fact private healthcare accounted for only about 6 percent of the market.

After the deal, as much as 70 percent of Mediclinic’s profit would come from outside South Africa, said Johannesburg-based Anchor Capital’s head of investments Sean Ashton.

Mediclinic said it would fund the deal with a 10 billion rand rights offer in which its plans to sell just over 111 million shares at 90 rand each.

Additional reporting by Tiisetso Motsoeneng; Editing by Jason Neely and Pravin Char

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