IHH, Turkey's Acibadem To Form JV Valued Over $2 Billion

Integrated Healthcare Holdings Sdn Bhd (IHH), whose shareholders include Khazanah Nasional Bhd and Mitsui & Co of Japan, has entered into a non-binding term sheet with Turkey's Acibadem Saglik Yatirimlari Holding AS, to explore establishing an international joint partnership.

If successful, the partnership between IHH and Acibadem will become an integrated group operating in the healthcare services sector within the geographical corridor from Asia-Pacific to the Middle East and Eastern Europe.

In a statement, the hospital operator said IHH and Acibadem will commence due diligence and exclusive negotiations for the execution of binding and definitive agreements in due course.

IHH wholly owns Parkway Pantai Ltd and IMU Health Sdn Bhd. IHH and Khazanah collectively own 11.5% of Bombay-listed Apollo Hospitals Enterprise Ltd in India.

Turkey is providing rich opportunities for merger specialists trawling for the next big deal, as the country’s booming economy and improving corporate governance partially insulate it from a slowing global M&A market.

Globally, mergers and acquisitions activity has been suffering; the euro zone debt crisis is dampening activity in countries to the west of Turkey, while political instability is complicating decisions in much of the Middle East and North Africa.

A strong recovery from the global financial crisis of 2008-2009 has persuaded many long-term investors to look at Turkey. Its economy grew 10.2 percent in the first half of this year; it will not escape the looming global slowdown, but the International Monetary Fund’s forecast of 2.5 percent growth for Turkey in 2012 is still well above the 1.1 percent which it predicts for the euro zone.

Turkey’s location as a land bridge between Europe and Asia is also attracting investors, even though its prospects of joining the European Union have faded for the time being because of disagreement over Turkey’s role in northern Cyprus and concern among some EU states about the admission of a largely Muslim country.

Turkey's geographic proximity to Eastern Europe, the Middle East and Asia positions Turkey as an ideal hub for the corporate world as the China of Europe with half of the country younger than 29 years.

M&A deals with Turkish targets shot up to 218 deals worth $24.9 billion last year from 167 deals worth just $4.0 billion in 2009, when activity was hit by the last global economic slump, Thomson Reuters data shows.

Last year’s dollar value was lower than the record $30.6 billion hit in 2005, but the number of deals was much higher; there were 102 deals in 2005. So far this year, the value of deals has dropped back somewhat, to $8.4 billion, but the number has remained extremely high at 151.

Global private equity houses, local independent PE shops as well as Family-owned PE funds are increasingly active in Turkey.

The most popular M&A sectors have been energy, power generation healthcare, retail and finance. But the biggest splash so far this year was made by the world’s largest spirits company, Diageo, which agreed in February to buy Turkish raki and vodka distiller Mey Icki for $2.1 billion.

For foreign investors, Turkey’s corporate regulation has been a concern, but the planned introduction of the Turkish Commercial Code in July next year is expected to improve disclosure of companies’ financial performance, governance and ownership structures.

Turkey has adopted liberal economic policies under Prime Minister Tayyip Erdogan’s AK Party government over the past decade, which has been a key source of stability and economic reforms.