Letting go of its trading division could bring in some much needed funds for NMC Group. It's also part of the strategy to focus exclusively on core operations made up of its hospitals and clinics. Image Credit: Gulf News Archive

Dubai: More than 300 staff members at NMC Trading, the division that handles distribution of medical equipment and personalcare brands, have been laid off, and with more likely to follow. These cuts could provide the first hints of what the UK High Court appointed administrators hope to do with NMC Health’s individual divisions.

“Even before the administrators came in, NMC Trading was seen as the first candidate to be sold off and help the Group generate some funds to clear off part of the debt,” said a senior official with the Group. “Now, with the administrators in control, nothing much changes on that strategy – anything that is seen as non-core will be sold.

“And right now, NMC Trading is not a core division.”

Sound rationale

It was on April 9 that NMC was placed under administration on the UK High Court’s orders, following a request submitted by ADCB, the UAE bank with the highest loan exposure – of Dh3 billion plus - to the company. Since then, the administrators – from the consultancy Alvarez & Marsal – have taken every opportunity to reassure staff at NMC owned hospitals and clinics that they had nothing to worry about.

But as regards other NMC assets, they have been less vocal about future plans.

To a query from ‘Gulf News’, a spokesman for NMC Health said: “The management team’s priority is to stabilise the [core NMC] business and ensure continuity of care at its hospitals and medical centres.

“To support these efforts, the Company will explore all options for NMC Trading, the Group’s distribution business. The process would not impact continuity of care at NMC’s healthcare facilities, nor would NMC Trading’s customers be affected.”

What does NMC Trading do?

NMC Trading, which represents brands such as “Nivea” through a long-standing alliance with Germany’s Beiersdorf, has always been a solid performer in its contribution to the overall Group results. But in recent weeks, it had lost some of the consumer brands and associations, such as the one with Pfizer, according to sources. (The pharmacies and other consumer-facing operations come under NMC Retail.)

The trading division used to employ more than 1,500 staff. “Ever since NMC Group’s problems came to light, it was always felt that the trading arm would be the first to go,” said an employee. “It seems the UK Court’s administrators are working on the end-of-service benefit payouts for laid off staff.

“Typically, at NMC, it used to be calculated on the basic salary. There are likely to be more cuts so that any new buyer will only have to deal with a leaner organization.”

Who would be an interested buyer?

Over the last three decades, NMC Trading managed to build a fairly sizable network for the brands it represented. It was also the leader in medical equipment supplies, and through the last five years when UAE was seeing an unprecedented growth in new hospitals and clinics, NMC Trading emerged as a big beneficiary.

That is what makes NMC Trading valuable for a new buyer, and in recent weeks there had been much speculation about possible buyer interest. Interestingly, during his short tenure as executive chairman, Faisal Belhoul, had categorically ruled out any immediate plans to sell the trading arm.

But, now, with the layoffs happening, it could be that the administrators are taking a different direction. Plus, they will also need to make sure that NMC Trading retains its core portfolio of brands.

Fair price

What constitutes a fair selling price? There are some who doubt whether NMC Trading can get a “fair” value if it’s sold… especially in the current circumstances. “Everyone’s aware of the nature of the problems at NMC Health, and why the trading arm is being sold,” said a banker. “Any buyer will be driving a hard bargain.

“NMC Trading is valuable only if any new buyer is sure of retaining most of the brands it represents now. Otherwise, the administrators will have to sweeten any deal further.”