Luye Group Completes $688 Million Acquisition of Healthe Care, Solidifying Integrated Global Healthcare Strategy

On April 18, 2016, Luye Medical Group announced that it had entered into an agreement withAustraliaHealthe Care, the third-largest private hospital group, has officially completed the $688 million transaction, marking its formal acquisition by Luye Medical.

Through this transaction, Luye Medical has successfully transitioned from the pharmaceutical sector to join the ranks of China’s largest international comprehensive private healthcare groups. Meanwhile, Healthe Care will formally enter the Chinese market, partnering with Luye Medical to jointly establish a premium hospital group tailored to the needs of the Chinese market and targeting the mid-to-high-end consumer segment.

Driven by population aging and robust industrial policies, China’s healthcare services market has entered a period of rapid expansion. Data show that the Chinese hospital market is valued at approximately $280 billion, with a compound annual growth rate (CAGR) of 20% in hospital revenues from 2009 to 2013; notably, private hospitals achieved an annual growth rate as high as 28%. However, due to the historical lack of policy support and structural issues within the industry, private hospitals have struggled to achieve specialization, premium positioning, and brand development. As a result, private medical institutions currently account for only 10% of total hospital admissions in China, significantly below the government’s target of 20–30%.

It is reported that Healthe Care, established in 2005, operates 17 medical facilities across major cities and regions in Australia. With nearly 2,000 beds, over 50 operating rooms, and a workforce of 4,500 employees, the company generates annual sales of approximately RMB 3 billion. Healthe Care’s specialty strengths span oncology, cardiology, neurology, orthopedics, rehabilitation, obstetrics and gynecology, and comprehensive medical services, supported by cutting-edge diagnostic and therapeutic technologies and equipment. The organization was the first globally to establish hybrid operating rooms and the first medical institution in Australia to introduce spinal robotics. Its day surgery centers, featuring more meticulous preoperative assessment protocols, advanced operating room conditions and equipment, highly professional and experienced surgeons and anesthesiologists, scientifically optimized patient care pathways, and comprehensive postoperative follow-up systems, have become a distinctive competitive advantage of Healthe Care.

Luye Group, established in 1994, is an innovative enterprise dedicated to the development of the health industry. Its subsidiary, Luye Pharma Group, is a R&D-driven professional pharmaceutical group that was listed on the Main Board of the Hong Kong Stock Exchange in 2014. The company focuses on the research and development, manufacturing, and sales of products in the fields of oncology, cardiovascular diseases, diabetes, and the central nervous system (CNS). It has become a leading innovative pharmaceutical enterprise in China, achieving internationally advanced levels in novel drug delivery technology innovation. Several innovative microsphere formulation products in the CNS and psychiatric fields have commenced registrational clinical studies with the U.S. FDA and have made breakthrough progress, positioning the company to potentially become the first Chinese pharmaceutical enterprise to launch a new drug in the United States.

“The acquisition of Healthe Care marks a significant milestone in the development history of Luye Medical, holding substantial strategic importance and far-reaching implications for the growth of its healthcare business. It has solidified the leading positions of Luye Medical and Luye Group internationally, particularly in China,” stated Mr. Liu Dianbo, Chairman of Luye Group. Healthe Care’s areas of focus and expertise—such as oncology, cardiology, neurology, orthopedics, and rehabilitation—align with the key specialties that Luye Medical intends to develop, and are also consistent with the core therapeutic areas of Luye Pharma, a subsidiary under the Luye Group.

Steve Atkins, CEO of Healthe Care, stated that Luye Medical Group’s selection of Healthe Care is a testament to the company’s consistent delivery of high-quality healthcare services. “During my communications with the management team at Luye Medical Group, I was deeply impressed by their vision and sincere commitment. I firmly believe that Luye Medical will continue to support Healthe Care’s business development in the future. I look forward to collaborating with Luye Medical Group’s management team to exchange expertise and gain experience in the medical profession. I hope our doctors and staff will work hand in hand with our partners at Luye Medical to provide the highest standard of healthcare services to patients in Australia, China, and around the world.”

It is reported that Luye Medical Group began its strategic deployment in the healthcare market five years ago and has maintained close attention to the currently active private healthcare sector. In 2015, Luye Medical Group partnered with Korea Bobath Memorial Hospital to establish a high-end brain disease rehabilitation hospital in Shandong Province. Located in the Shandong International Biotechnology Park within the Yantai High-Tech Industrial Development Zone, the hospital receives technical service management support—including consulting, operations, and education and training—from the Korea Bobath Medical Foundation and Shuyou Group. Focusing primarily on the diagnosis and treatment of neurological disorders and chronic internal medicine conditions, the hospital is committed to advancing medical technical standards in China’s professional brain rehabilitation field.

According to Green Leaf Healthcare, the first two hospitals under this partnership will be established in Chongqing and Shanghai, respectively. The company plans to operate 10 hospitals across China by 2020, offering core clinical services in oncology, cardiology, neurology, orthopedics, and ambulatory surgery centers.

Liu Dianbo stated: “This international acquisition holds profound significance for the expansion and growth of Luye Medical Group’s future new businesses. It will strongly propel the development of Luye Medical’s operations in the Chinese market. By leveraging and introducing advanced international medical technologies, operational models, and management systems, Luye Medical will deliver high-standard, internationally aligned healthcare service experiences to the Chinese people, meet their growing demands for health and wellness, and make greater contributions to improving public welfare and fostering comprehensive social development.”

It is understood that this acquisition is very likely the largest overseas healthcare M&A deal by a Chinese private medical group, and also the largest healthcare investment project by a Chinese enterprise in Australia.

VCBeat Analysis:

Luye Group’s strategic layout in the hospital sector is characterized by precise positioning and exceptionally high profitability. Around 2015, Luye Group successively partnered with South Korea’s GOODWILL,Aireme Hospital Group, Korea,Bobath Memorial Hospital, South KoreaHaving entered into a strategic partnership, Luye Group has expanded its hospital coverage to include multiple specialties such as dentistry, pediatrics, obstetrics and gynecology, cosmetic and plastic surgery, and neurology. The consumer base—comprising children, postpartum women, and beauty-conscious females—represents high-ARPU (Average Revenue Per User) segments. Meanwhile, China’s aging population trend is gradually heating up the market for chronic disease management and rehabilitation among the elderly. Ahead of the impending industry wave, Luye Group has successfully secured a strong position.AustraliaThe acquisition of Healthe Care, the third-largest private hospital group, has expanded Luye’s therapeutic coverage to include oncology, cardiovascular and cerebrovascular diseases, neurology, and chronic disease rehabilitation. This expansion is particularly critical for the completeness of its strategic layout and market positioning. Such rapid investment activity also demonstrates Luye Group’s firm determination to transition from pharmaceuticals to multi-sector healthcare.

Compiled from: China News Service, Yicai Global, and Phoenix New Media