NMC Health, the operator of the biggest network of hospitals in the United Arab Emirates, said it received approaches from private-equity firms after being targeted by short seller Muddy Waters Capital.
The UK-listed hospital operator said Kohlberg Kravis Roberts & Co. and GK Investment made highly preliminary approaches though neither party made any offer and no terms were discussed. The stock rose as much as 18 per cent in London, after having lost 46 per cent of its value last week.
In a separate release, the company also said a review of its shareholders suggests that the size of the stakes of chairman Bavaguthu Raghuram Shetty’s and other investors have been incorrectly reported. They include vice chairman Khaleefa Butti Omair Yousif Ahmed Al Muhairi.
The board has asked Shetty and Butti not to attend any board meetings until the matter is clarified, and said the board will make a decision about their roles as company directors.
On Feb. 4, Muddy Waters published a tweet asking if NMC’s top shareholders aren’t selling shares because of margin calls.
Muddy Waters published a report in December saying the health-care company’s financial statements hint at potential overpayment for assets, inflated cash balances and understated debt.
Insufficient disclosure of related-party transactions, manipulation of the balance sheet and inflated asset purchases are some of Muddy Waters’s most serious allegations. NMC’s $107m redevelopment of NMC Royal Women’s Hospital in Abu Dhabi “contains numerous red flags,” the short seller said. NMC also appears to have paid too much for a stake in Premier Care Home Medical and Health Care, the report alleged.
NMC’s margins are “too good to be true” relative to peers, Muddy Waters, which is shorting the company’s stock, also said. “We are unsure how deep the rot at NMC goes, but we do not believe that its insiders or financials can be trusted.”
NMC shares have fallen more than 70 per cent since the Muddy Waters report came to light, giving the company a market value of less than 1.5bn pounds ($1.9bn). The company has said the allegations are false and misleading, and is conducting an independent review.
A native of India, Shetty moved to Abu Dhabi in 1973 and founded NMC in the 1970s. It’s now the biggest private health-care provider in the United Arab Emirates.