Competition threats may block Mediclinic merger

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Mediclinic’s proposed acquisition of Matlosana Medical Health Services may be prohibited for the same reasons the Competition Commission blocked Life Healthcare’s bid to acquire Lowveld Hospital in 2015, says a Business Day report.

Earlier, the commission had said it was recommending that the Competition Tribunal prohibit Mediclinic’s proposed acquisition of Klerksdorp-based Matlosana. The latest research from the commission shows this recommendation marks its sixth prohibition since the end of March.

The recommended prohibition of the Mediclinic merger was based on the grounds that it was ‘likely to substantially prevent or lessen competition in the market for private healthcare services in Klerksdorp and the surrounding areas’.

While the Life Healthcare transaction was classified as an intermediate one, which is decided by the commission, the Mediclinic deal is a large merger and the decision is taken by the tribunal. This means the parties have an opportunity to argue why their transaction should not be prohibited.

The decision has a familiar ring to it. In January 2015 the commission prohibited Life Healthcare’s acquisition of Lowveld Hospital on the grounds it was likely to result in a substantial prevention or lessening of competition in Nelspruit and the surrounding areas.

“There was no credible technological, efficiency or procompetitive gains submitted by the merging parties that could outweigh the competitive harm identified by the commission,” commissioner Thembinkosi Bonakele said.

The National Hospital Network is a network of independently owned private hospitals that attempts to achieve economies of scale to compete against the big three players, which are Mediclinic, Life Healthcare and Netcare.

While the Life Healthcare transaction was classified as an intermediate one, which is decided by the commission, the Mediclinic deal is a large merger and the decision is taken by the tribunal. This means the parties have an opportunity to argue why their transaction should not be prohibited.

The encouraging statistic for Mediclinic is that the tribunal has only prohibited 10 mergers since 2000. Three of these were overturned on appeal.

Business Day report

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