3i-backed private equity group 3TS plans to sell its 49% stake in CMU Unirea and Medlife president Mihael Marcu is to sell his 30% stake in Medlife. The timing surprised competitors, as Romania is in a deep recession with GDP expected to fall 8%, maybe 10%, this year. Florin Andronescu at Sanador, a rival Bucharest clinic, said: “every month our sales drop maybe ½% or 1%, no one knows when we will hit bottom.”

CMU Unirea is a big health subscription and clinics operation. Over the past two years the company has built a national network of 17 clinics, a 27 bed maternity hospital, an MRI/CT imaging centre and a stem cell bank. 3TS director Daniel Lynch says that sales should hit Euros 16m up from Euros 5.5m in 2006 and claims EBITDA will hit Euros 5m. The company is perceived as having a particularly strong management team and gets 80% of sales from corporate subscription.

Marcu’s stake is being sold by Austrian bank Raiffeisen. The company is said to be seeking an enterprise value of Euros 60m and is claiming that sales will reach Euros 24-26m with an EBITDA of Euros 5.2m. That implies a price of nearly 12 times ebitda and Medlife claims to have five bidders interested.
Lynch, who declined to explain the reason for the sale, said: “healthcare remains a nice play in difficult markets and here in Romania there is a real need for new investments.” He said that it was proving hard to find new customers but that employers have not, as yet, made the drastic cuts to staff numbers which could seriously impact sales.

Our Analysis: One can only speculate as to whether 3i’s well publicized troubles and sell-offs are behind the decision to put CMU Unirea up for sale. The company is certainly seen as the crown jewels in the 3TS portfolio and is widely respected in Romanian private healthcare. It is one of the best brands. But this is a minority stake.

Medlife isn’t such a strong brand, but has been pursing an equally ambitious expansion plan. The supposed target enterprise value of 12 times looks toppy – 7-9 would be a more realistic level in these markets.