Abu Dhabi wealth fund Mubadala weighs deal in Shetty’s troubled NMC

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As the crisis surrounding troubled hospital operator NMC Health Plc deepens, Abu Dhabi is turning to Mubadala Investment Co. to safeguard the emirate’s reputation among global investors.

The $229 billion wealth fund is considering a potential investment in the United Arab Emirates’ largest private health-care provider as the FTSE 100 company faces an investigation by the UK’s Financial Conduct Authority over allegations of fraud, according to people with knowledge of the matter.

Read: NMC Health fires CEO as financial discrepancies revealed

The government is keen to support NMC -- whose shares have been in free-fall since a December report by Muddy Waters Capital LLC -- to prevent further damage to the emirate’s image as a key regional hub for business, some of the people said, asking not to be identified because the talks are private. NMC is also strategic to the region’s nascent health-care industry, they said.

Abu Dhabi is using its sovereign funds and state-related entities to support its most strategic companies as they come under pressure. Last month, the emirate outlined plans for a government-owned utility to rescue struggling Abu Dhabi National Energy Co., known as Taqa. The bailout follows a series of mergers that saw some of its largest banks take over weaker lenders.

Regional governments “have taken stakes in a number of family-owned ‘too big to fail’ firms requiring restructuring,” said Alissa Amico, managing director of Govern, which studies emerging markets. “If Mubadala decides to acquire a stake in NMC, this investment won’t be without precedent regionally or globally.”

Mubadala itself is the result of a 2017 merger between its predecessor, Mubadala Development Co., and International Petroleum Investment Co., which had gotten caught up in a series of investigations over whether and how money flowed from the Malaysian government’s scandal-ridden 1MDB development company through fraudulent shell companies to corrupt officials.

For Abu Dhabi, NMC played a key role in expanding the emirate’s underdeveloped medical sector and was the first Abu Dhabi company to list shares in the UK capital. The stock jumped almost 20-fold in the following few years, with its market capitalization peaking above $10 billion in August 2018. It’s now worth about $2.5 billion.

Mubadala’s potential interest in NMC comes after Muddy Waters alleged that the company had overpaid for assets, inflated cash balances and understated debt. The company has said the allegations are baseless, but in January hired former FBI Director Louis Freeh to investigate.

Aside from Mubadala, investors linked to Italian hospital operator Gruppo Ospedaliero San Donato SpA have said they’re studying a possible offer for the company and are working with financial advisers. KKR & Co has said it’s not making an offer for the business after NMC said it received an approach from the buyout firm.

Mubadala has held early discussions to look at a range of options for NMC, including buying a stake and taking a board seat, according to the people. While discussions are ongoing, there can be no guarantee of a transaction given the complex issues facing the company, they said. Representatives for Mubadala and NMC declined to comment.

The sovereign fund is also seeking to expand into health care as part of Abu Dhabi’s efforts to diversify its economy by turning oil revenue into profitable investments. It’s in talks to buy Jadwa Investment Co.’s health-care assets in the United Arab Emirates, people familiar with the matter said last month.

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