Vitalia for sale (again)

Blackstone, the private equity owner of Vitalia, has yet again put the French private hospital group up for sale. What are its prospects for the group, which Healthcare Europa estimates should have sales of €700m in 2014?

We hear that Morgan Stanley and Rothschild have been instructed to sell Vitalia, a chain of some 48 hospitals across France.

But quite who will buy Vitalia is unclear.  The two largest groups in France, Ramsay and MedipôleSudSanté/Medi-Partenaires, have both recently done mega deals. Ramsay is buying Generalé de Santé. Medipôle and Medi-Partenaires are merging. That leaves Vedici, which was recently bought by CVC, as the obvious candidate.

Blackstone has made various attempts to sell Vitalia over the last few years. Merger talks with Medi-Partenaires failed as management bickered over who would run the group.  In the summer of 2014, Vitalia tried to sell some of its property portfolio but, again, the deal fell through. Stephane Pichon, CEO of Your Consult said that reflected changes in French law that give tenants more rights as well as concerns over quality. Christian Le Dorze, its charismatic founder, stepped down as president in 2013, but remains on the board.

The old saw is that a third of Vitalia’s are good, a third average and a third poor. But Pichon says that recently the group has done better. “Procurement has been much improved. Vitalia’s EBITDA margins are between 16-20%.”

We were unable to contact Vitalia or its banks as we went to press.

Our Analysis: Vitalia is unusual insofar as the vast majority of its hospitals are in smaller cities and regional towns.  This was a deliberate tactic pursued by Le Dorze. It was based partly on the idea that this would lead to it avoiding head-on competition.

But it also leaves many of its facilities looking potentially vulnerable as the regional health authorities seek to force a rationalisation of provision. All too often, this means that the private sector loses out, particularly smaller hospitals with small catchment areas. It is worth noting that Vitalia is the only private hospital group which has publicly berated the authorities for favouring the public sector. At least one Vitalia hospital has lost out badly to a public facility in the same town.

Despite the prospect of almost zero tariff rises for the private sector, pursued by successive French governments, there are still attractions in owning a French hospital – demand will rise as the country ages, competition is controlled and you can squeeze costs. We were surprised by the demand for Portuguese hospital chain Espírito Santo Saúde. Vitalia could well attract international investors.

Source: Healthcare Europe / November 3rd 2014

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