Back to the complete issue
Tuesday, 21 December 2021

IDH pushes into Pakistan with landmark acquisition

Consumer healthcare giant Integrated Diagnostics Holdings (IDH) will acquire a major stake in one of Pakistan’s largest diagnostics providers, marking the company’s entrance into South Asia and giving it access to one of the biggest markets in the region. The LSE-and EGX-listed company announced yesterday in a regulatory filing (pdf) that it has signed an agreement to purchase a 50% stake in the owner of Islamabad Diagnostic Centre (IDC), which operates more than 80 labs across the country.

The transaction: IDH will acquire a 50% stake in Base Consultancy, a special purpose vehicle that owns 100% of IDC, at a cost of USD 72.35 mn. The selling shareholder is UAE-based Evercare Group, a healthcare platform managed by global private equity firm TPG and backed by its Rise Fund.

How big is IDC? The company’s revenues grew 208% year-on-year to USD 46 mn in the fiscal year ending 30 June 2021, with a very healthy EBITDA margin of about 48% and net income of nearly USD 14 mn (good for a margin of nearly 30% on the bottom line). The company plans to hit 100 branches by 2023 and is looking to push into 8-10 new cities in the next two years, adding to its 30-country footprint. IDC served nearly 2 mn patients and performed around 3 mn tests in the 12 months ending 30 June.

IDH’s LSE-listed shares rose 2.3% on the news, closing the session at USD 1.34 per share. On the EGX, IDH’s stock price was unchanged, trading at EGP 19.50 per share.

Crunching the numbers: IDH will fund the transaction with a mixture of debt and cash on hand, including a USD 45 mn eight-year facility it lined up in May from the International Finance Corporation (IFC) and a USD 15 mn IFC syndicated facility from Mashreq Bank.

Pakistan is a huge market: The transaction will see IDH adding a fifth country to its portfolio, along with Egypt, Jordan, Sudan, and Nigeria, giving it access to the world’s fifth-most-populous country. Pakistan’s population exceeds 200 mn, 63% of whom are under the age of 30. Out-of-pocket payments make up around 56% of the country’s healthcare-related expenses.

IDC ticks all the boxes: “[The acquisition] is fully aligned with our regional expansion strategy that targets high-growth and underpenetrated markets where our platform is well-suited to deliver exceptional quality of care to a broad and growing patient-base,” said IDH CEO Hend El Sherbini. “Pakistan’s young population and lagging investment in healthcare provide for significant future potential.”

The geographical expansion comes on the back of solid earnings for IDH, which saw revenues more than double in 3Q2021 and net income jump 138% y-o-y to EGP 479.7 mn.

Family business success story: IDH is a leading provider of diagnostic services, best known in Egypt for its Al Borg and Al Mokhtabar brands, the two largest players in the market. You can read more about how the family-run business managed to successfully transform into a publicly-traded institution in our interview with IDH CEO Hend El Sherbini here.

What’s next: The transaction is expected to close in 1H2022 as it is still subject to the satisfaction of a few key conditions, including the approval of the Pakistani regulator, which is expected to be received within three to six months. As part of the transaction, Evercare’s representatives on IDC’s board will step down and be replaced by new directors from IDH, which will hold four of the seven seats. IDC founder Rizwan Uppal will continue to serve as chairman and CEO following the acquisition, while his brothers — Rehan and Imran — will remain on the company’s board.

ADVISORS- Renaissance Capital is sole financial advisor to IDH for the transaction and financing, while White & Case acting as international counsel, Chima & Ibrahim Advocates / Corporate Counsel as local counsel. Ernst & Young Global is advising on financial and tax due diligence. EFG Hermes (pdf) is exclusive financial advisor to TPG, with Debevoise & Plimpton LLP acting as counsel and RIAA Barker Gillette as counsel to IDC.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.