Medical Park and Universal Group, two big, heavily-indebted private Turkish hospital groups, are close to deals with new investors. Carlyle Group is undertaking due diligence to purchase a stake of around 40% of Medical Park for $100m, whilst Universal will sell its Ege Saglik hospital in Izmir, plus other Black Sea hospitals, to an un-named fund.

Medical Park and Universal were both in the midst of a massive expansion plan before the crash and both had large, foreign currency-denominated debts. We estimate that both have some 3,000 beds. Universal, historically the largest group in Turkey, has some 64 hospitals and clinics, whilst Medical Park has a chain of 13.

Carlyle Group said it was “too early” to comment on the acquisition. Our sources say that due diligence should be completed shortly. Universal is likely to have to sell a string of its crown jewels.

Both groups were badly caught out by the crash and by new rules introduced by the Turkish government which limited the premium that private hospitals can charge state-funded patients to 30%. This effectively made many gleaming new facilities, which were set up with the goal of charging up to several 100% more than the government basic, economically unviable and has left a lot of white elephants with very low bed occupancy rates. Established top brand hospitals, such as Acibadem, Memorial and Florence Nightingale, have been able to weather the storm, but other groups with ambitious new build schemes such as Medical Park, Universal and Medicana were very badly affected.

The Turkish government has now said it will revise these rules and will in future introduce five different grades of hospital with the top hospitals able to charge 70% extra. It will be interesting to see whether or not these investments are made ahead of the introduction of the new ceiling prices which our sources say is planned for the end of 2009. The Turkish government has tended to drag its feet on this measure – the reduction of the premium to 30% is very popular with the electorate!

Long-termer private hospitals are likely to be a good bet in Turkey – the population continues to grow, the state sector, despite improvements, remains inadequate. There is also the possibility of healthcare tourism – Universal’s hospitals on the Black Sea coast are said to attract many wealthy Russians. Note that the National Bank of Kuwait is also close to buying Turkey and we also hear that Marfin, the big Greek private equity group which owns Greek hospital chain Hygeia is keen to add to its four Turkish hospitals. Private equity has well and truly returned to Turkish healthcare!