High-end healthcare provider becomes Russia’s last $ 1 billion unicorn
Moscow’s high-end private healthcare provider European Medical Center took advantage of the boom in the global stock market with an Initial Public Offering (IPO) that valued the company at more than $ 1 billion.
The group, which caters to Moscow’s wealthiest residents with a range of hospitals and clinics in the capital, said it completed preparations for an IPO more than three years ago, but chose to strike now to take advantage of “favorable market conditions”.
Russian stocks are trading near all-time highs and the market has seen a handful of IPOs in recent months as companies capitalize on a strong investment appetite.
Russia’s health industry May be on the cusp of rapid growth in the wake of the coronavirus pandemic, analysts say, with the European Medical Center (EMC) hoping the high-end segment of the market will be immune from broader economic stagnation of Russia and the decline in living standards.
“This IPO is an important and logical step in the further development of EMC, which has experienced gradual growth over many years,” CEO Andrey Yanovsky said at a press conference at the Exchange from Moscow, where EMC’s global certificates of deposit, a market instrument that represents a share of the company – are now listed.
But the deal itself will not provide an additional source of liquidity for the company to fuel its future growth, since the proceeds of the IPO were pocketed by the company’s shareholders who sold their stakes.
The deal brought company owners, including oligarch Roman Abramovich, nearly $ 500 million in revenue. Abramovich‘s Millhouse Capital got rid of its 6.9% stake, worth around $ 77 million, while majority shareholder Igor Shilov reduced his stake from 71% to 55%, recouping $ 180 million in the deal.
The IPO catapulted Shilov, a former fur hat dealer, into the club of Russian billionaires, according to Bloomberg. Shilov first made his fortune from a Russian beverage company he founded and then sold to Coca-Cola, using the proceeds to buy EMC for around $ 100 million on the eve of the 2008 financial crisis.
The exclusive healthcare provider, which operates 12 hospitals and clinics in Moscow and the Moscow region, has grown rapidly since then.
Despite the coronavirus pandemic threatening to disrupt the supply of other lucrative medical treatments, like oncology and maternity services, EMC’s revenue jumped 20% in 2020 to 241 million euros ($ 284 million), while profits rose by a third to 80 million euros. ‘euros ($ 95 million).
“We could have done this IPO at any time over the past three years,” CFO Dmitry Shmelev told The Moscow Times. “The company and our shareholders felt this would be the most successful moment right now, and given the large demand from investors, we realized it was the right time to close the deal.”
Famous for dealing with wealthy professionals, foreign diplomats and the Moscow elite, EMC says it expects growth of around 10% per year for the foreseeable future.
In its investment prospectus, the company cited Russia’s “aging population and increasing life expectancy” as the source of expected future success. He also highlighted the “poor level of public health services” in Russia, which has been exposed by the pandemic, as a potential increase in demand for private treatment among an increasingly health-conscious population.
Analysts tend to agree. “Covid-19 has boosted demand for private health services, given the deterioration in the quality of public services – so the rich have chosen to pay,” said Dmitry Polevoy, analyst at brokerage firm Loko Invest.
The Mother & Child Group – the only other privately-held Russian healthcare company to be publicly traded – has seen its share price more than double in the past year amid investor optimism towards the sector . BCS Investments analyst Dmitry Puchkarev said their performance could have convinced EMC shareholders that it was time to cash in.
“The goal of an investor is always to make money after investing in a company for a long time – so a public offering on such favorable terms is a great opportunity to monetize”, Viktor Dima, director of the analysis of stocks at Aton, told The Moscow Times.
But despite catering to Moscow’s wealthiest residents, some analysts say EMC is not completely immune to the wider economic malaise in Russia, which has seen living standards plummet to its lowest level in a decade. A struggling middle class eats potential new customers lower down the income ladder, while a recent EY investigation found that eight out of ten private medical companies said their customers’ purchasing power fell during the pandemic.
“The private health sector looks set to continue on a good footing, but the premium part of the market has limits, mainly due to the small size of the industry,” Dima added.
As global travel restrictions begin to ease, some also believe that the wealthy Russians who helped EMC achieve record profits in 2020 may again start heading to Western Europe or the United States for more. medical treatments.
Market sources say there are many more deals on the cards, as a handful of Russian private companies plan to debut on the stock exchange.
But recent launches have been mixed. Actions in Russian e-commerce company Ozon has grown by more than 80% since listing on the US-based Nasdaq last November, while home builder Samolet has seen its valuation double in the same period. But investors in discount retailers FixPrice IPO are still in the red and gold miner NordGold has put aside its plan to re-list on the London Stock Exchange, citing the volatility of the precious metal’s price.
EMC shares were broadly flat during the first trading day on Thursday as the broader market fell. BCS’s Puchkarev predicted volatility, but said he doesn’t expect EMC’s stock price to take off once post-IPO trading restrictions are lifted next week.
“The company received a relatively fair assessment. It has high profitability, wide diversification and a high dividend yield. Any loss in value is in part due to the ‘country haircut’ inherent in Russian assets, ”he said, referring to the fact that Russian stocks tend to trade for less than what is expected. could expect increased geopolitical and monetary risks.
“Given this, it is difficult to identify a significant increase in the medium term. “
But both insiders and outsiders alike say EMC’s stock market listing will leave them well placed to tap into new sources of long-term investment.
“They don’t get any money from this deal, but they get a mechanism to raise funds more easily – through public placements in the future,” said Dima d’Aton.
“I have a feeling the industry as a whole will need more investment, so maybe we will see more investments in the future.”
After an enthusiastic ringing of the opening bell of the Moscow Stock Exchange to kick off trading on Thursday morning, CEO Yanovsky reiterated EMC’s ambition to build on the record revenues and profits recorded during the pandemic.
“We have a plan – a serious plan. We will not stand still.