Dallah Healthcare to buy majority stake in Kingdom Holdings' Care Shield

Saudi Arabia’s Dallah Healthcare agreed terms to acquire a majority share in Kingdom Holding's Care Shield Holding Company in return for shares in its own business and a cash sum.

Dallah Healthcare is buying a 54.65 per cent of Care Shield from Kingdom Holding for 300 million Saudi riyals, which it will pay for partly by swapping treasury shares, and partly in cash, according to statements made by both companies to the Tadawul stock exchange, where their shares trade.

Kingdom Investment and Development Company (KIDC), a subsidiary of Kingdom Holdings, will receive shares equating to a 4.99 per cent stake in Dallah Healthcare, valued at 186m riyals(Dh182m). The remaining 114m riyals will be settled in cash.

“This transaction is part of KIDC’s strategy of expanding and enhancing the value of its investments in the healthcare sector of the Kingdom of Saudi Arabia,” Kingdom Holdings said in its statement on Sunday.

The two sides announced in September last year they were in talks regarding a cash and share swap deal, and although terms have been agreed, the transaction is still subject to approval from both companies’ shareholders and from regulators, the statement said. Either side has the right to walk away if these are not completed within six months.

Care Shield owns a number of subsidiaries including Medical Service Projects Company, which owns Riyadh’s Kingdom Hospital, Consulting Clinics Company and Modern Clinics Pharmacy Company.

Dallah Healthcare also revealed it had agreed to buy a further 4.08 per cent in Care Shield for 22 million riyals from shareholders Abdulrahman Bin Ibrahim Abu Hemid and Sons for Trade and Investment and from Adel AlMandeel, which will bring its total stake in the company to 58.64 per cent.

Dallah Healthcare operates the Dallah Hospital in Riyadh and a pharmacy distribution business. The company made a net profit of 146.9m riyals in 2019 on revenue of 1.25 billion riyals.

In its statement, Dallah Healthcare said the deal was part of its “expansion plan to support its market standing in providing premium medical service, which is in line with its strategic objectives”.

Saudi Arabia has taken various steps, including allowing 100 per cent foreign ownership of companies in the market, to attract greater private sector investment into its healthcare sector.

In September last year, real estate consultancy Colliers forecast that the kingdom will need between 29,000 and 47,000 additional beds to meet demand as its population grows, which will require between $16.2bn-$21.1bn (Dh59.5bn-79.5bn) of investment.

“We expect most of the investment to come from the private sector, privatisation through public-private partnership (PPPs) and the creation of more [real estate investment trust] funds,” said Mansoor Ahmed, director of healthcare, education and PPPs at Colliers.

Dallah Healthcare's shares were trading up 1.3 per cent by 1pm UAE time on Sunday, while Kingdom Holding's shares edged up 0.3 per cent.