M&A WATCH- Healthcare giants Alameda and Cleopatra are in merger talks — and the ECA isn’t too happy about it: The Egyptian Competition Authority (ECA) is reportedly looking to block ongoing merger talks between leading private healthcare providers Cleopatra Hospitals Group and Alameda Healthcare, ِAl Masry Al Youm reports, quoting unnamed government sources. News that the ECA could intervene emerged after unnamed sources confirmed the talks to Al Mal. Sources close to the talks confirmed to Enterprise that the two healthcare groups are in discussions. Cleopatra said in a bourse disclosure (pdf) earlier this week it had not signed contracts, but did not deny it is in talks.

The ECA is warning it could take unspecified “strict legal measures” to block the merger and has already asked the Health Ministry to fall back on a 2014 ministerial decree preventing ownership transfer at private hospitals without the greenlight from authorities. The move comes after the ECA weighed the negative effects a merger would have on competition, the sources said.

But here’s the thing: As big as these two groups are, they’re a drop in the bucket when it comes to total hospital beds in Cairo, let alone Egypt as a whole. Cleopatra has about 780 beds according to its most recent investor presentation, while Alameda has about 670. That would give the combined entity something around 1,450 beds — Egypt has at least 152k hospital beds, according to data from the World Health Organization (pdf), a figure that roughly squares with independent estimates the country as about 1.3-1.5 beds per 1k people.

The merged entity would have great brands, but far from enough beds to be anti-competitive. Colliers, the real estate consultancy, says Egypt had about 131k hospital beds in 2014. There are at least 33k beds in the private sector, while 41k are owned by the Ministry of Health and another 56k beds are run by entities affiliated with the state. Using Colliers’ figures, that would give the merged entity about a 4.4% market share of private sector beds and a market share of about 1.1% of the total market.

What can the authority do? The ECA has the right to slap fines and impose post-merger conditions (similar to what it recently did with the Uber-Careem merger), but only if it can prove that a merger constitutes a breach of the Antitrust Act with imminent and irreversible damage to consumers and / or to competition itself. You can check out our complete guide on anti-cartel legislative provisions for a sense of the scope of the ECA’s powers. The authority is currently drafting legislation to give it sharper teeth against anti-competitive M&A, Chairman Amir Nabil said last December — including, if those regs go through, formal right to approve any merger or acquisition worth more than EGP 100 mn.

Who are Cleopatra and Alameda? Cleopatra was formed in a rollup led by Abraaj. Listed on the EGX, its largest shareholder is now Care Healthcare, which holds 37.73%. The remaining shares are in freefloat, according to a regulatory filing (pdf). The group owns six major hospitals in the Greater Cairo area including Cleopatra, Nile Badrawy, Al Shorouk and Cairo Specialised. Most recently, it acquired El Katib Hospital in Dokki in November last year. Alameda, a partnership between CEO Dr. Fahad Khater and the Emirates’ KBBO Group, owns high profile facilities including As-Salam International and Dar Al Fouad.