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Sh100bn Dubai PE fund shops for local hospital stake deals

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Metropolitan Hospital chief executive Kanyenje Gakombe. PHOTO | FILE

Summary

  • Abraaj Group has been scouting for local hospitals and other healthcare firms for possible acquisition with focus on centres servicing middle to lower income clients.

Dubai-based private equity (PE) firm Abraaj Group is shopping to expand its interests in Kenya’s healthcare sector with a purse of Sh101.3 billion ($1 billion) targeting South Asian and African markets.

The company has been scouting for local hospitals and other healthcare firms for possible acquisition with focus on centres servicing middle to lower income clients.

One of the companies it is looking at is Metropolitan Hospital although Abraaj told the Business Daily there have been no commitments or detailed discussions so far.

“Metropolitan is one of the many we’re looking at,” said a director in Abraaj healthcare team Frederick Kambo. Abraaj is looking at expanding existing interests in Kenya’s healthcare sector having already partnered with Swedish venture capitalist to buy into Nairobi Women’s Hospital in 2013. It also owns a stake in Avenue Hospital.

“There are a number of things driving this— the rising middle class and the gap we see in service provision,” said Mr Kambo.

Mr Kambo did not say how much of the $1 billion Growth Markets Health Fund was set aside for Kenya. The fund is backed to the tune of $150 million by the International Finance Corporation (IFC) and is intended to “undertake acquisitions, brownfield and greenfield projects”.

Deloitte estimates that the Middle East and African regions will account for the fastest growth in healthcare spending over the next three years, partly driven by the expanding middle class.

“The basic thing is that we have a critical mass of consumers who can afford to pay for services and that means a growing industry,” said Metropolitan Hospital chief executive Kanyenje Gakombe, whose hospital was originally named by the New York Times as one of Abraaj’s target.

These consumers often find themselves locked out of the high-end hospitals in Kenya’s healthcare sector yet they cannot rely on government services. 

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Metropolitan Hospital set up shop in Eastlands over two decades ago and recently has been expanding its facilities to meet rising demand. Dr Gakombe said the hospital is increasing its bed capacity to 150 from 76.

It is also building additional theatres and hopes to set up an Intensive Care Unit (ICU).

Although Dr Gakombe declined to speak specifically about the Abraaj discussions, he said his firm is open to partnerships and has spoken to other interested investors.

From these potential partnerships, he is seeking both capital as well as the opportunity for skills transfer.

Abraaj already has existing investments in India, a country that has become a key medical tourism destination due to its ability to provide specialised healthcare at low prices relative to the European or American markets.

Abraaj is just one of the Dubai-based companies turning to Kenya. Last week, a delegation from the Dubai Chamber of Commerce and Industry visited Nairobi with the United Arab Emirates ambassador noting that companies were particularly interested in the health sector but were concerned about the cost of doing business in Kenya.