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[21st Century Economics] Harmonicare Medical Expands Fast and Merges Beijing Huafu Women& Children’s Hospital

Author: Date:2018-01-24 14:05:49

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On November 16th, Beijing Heanda, a wholly-owned subsidiary company of Harmonicare Medical (01509.HK) concluded an acquisition agreement with the controlling shareholders and the company of Beijing Huafu. According to it, Beijing Heandaacquires 51% stock equity in Beijing Huafu at a price of RMB 12,042,600 Yuan and agrees to provide an interest-free loan of about RMB123,000,000 Yuan to help Beijing Huafu repay the RMB123,000,000 Yuan interest-free loan provided by its controlling shareholders. Therefore, this strategic acquisition amounted to RMB135,000,000 Yuan.

Beijing Huafu Women& Children’s Hospital, which is located adjacent to CBD of Beijing, started up in October 2014 and was put into formal operation in December of the same year, is a specialized women& children’s hospital established in accordance with the JCI standard released by "Joint Commission on Accreditation of Healthcare Organizations".

Harmonicare Medical pointed out that the group has always been focusing on Beijing and the acquisition would effectively expand the group's share in Beijing market. WANG Hailong, CEO of Beijing HarMoniCare Women& Children’s Hospital made a further analysis to the journalist of 21st Century Economic Report that the Asian Sports Village Branch of Beijing HarMoniCare Women& Children’s Hospital was in the north of Beijing, but the acquisition of Huafu Women& Children’s Hospital would allow Harmonicare Medical to expand its radiation range, focus on the east market and also cover a vast crowd.

Beijing has always been the gathering place of high-end medical resources in China, and the Health and Family Planning Commission of Beijing has been considering how to relieve the resource intensive problem. In September 2015, the Health and Family Planning Commission of Beijing issued the "Further Notice about Approval of Medical Organizations and Adjustment of Medical Beds" (hereinafter referred to as the "Notice"), which clearly specified that building of new comprehensive medical organizations was forbidden and increase of beds in existing medical organizations without approval was also prohibited within the Fifth Ring Road of Beijing.

To this end, it's impossible for the medical organizations, including private medical organizations, to expand or build new ones. However, the huge market and demands remain unchanged. "Merger and acquisition of existing hospitals, especially specialized hospitals, has become an important way for development", one leader of Harmonicare Medical expressed to the journalist of 21st Century Economic Report.

ZHAI Guirong, Medical Dean and expert in gynecology and obstetrics of Beijing Beijing HarMoniCare Women& Children’s Hospital believes that both the number of hospital visits and the number of deliveries have increased significantly since the country fully liberalized the two-child policy. It's expected that the fertility rate will continue a fast growing trend in the coming years, the influence of universal two-child policy will become much greater, and the rigid demand for specialized obstetrics and gynecology hospitals brought by the two-child development trend will increase significantly.

As early as Harmonicare Medical was listed, it expressed that it would expand its business in the coming years. According to the prospectus, Harmonicare Medical raised a net capital up to RMB1.127 billion Yuan, 60% of which would be used to build new hospitals in Beijing, Xiamen, Nanjing, Hangzhou and Chongqing, 15% used to acquire new hospitals and 10% used for upgrades of existing hospital facilities and procurement of new equipment.