Saudi Arabia’s Alkhabeer Capital this week acquired a majority stake in integrated healthcare provider Eed Group via its Alkhabeer Healthcare Private Equity Fund I, a Shariah compliant close-ended privately-offered investment fund launched in the final quarter of last year. VINEETA TAN explores how this acquisition builds on the growing appeal of Saudi Arabia’s healthcare sector as a high-potential asset class for investors.

Expected to almost triple by 2018 from US$46 billion in 2012 to about US$133 billion (according to the Bain & Company Global Healthcare Private Equity Report 2014), the pharmaceutical and healthcare segment in the GCC has generated significant interest among investors, especially Shariah-seeking investors. The report noted Asia Pacific, the Middle East and Africa as markets with the highest volume growth in terms of private equity healthcare opportunities in 2013. And as Saudi Arabia takes home the title of being the largest healthcare market in the region (according to Alkhabeer), the Kingdom holds particular interest to investors, especially the private segment which currently accounts for 32% of the domestic market, an area independent healthcare provider, Eed Group looks to expand.

“Eed Group has a strong brand name in Saudi Arabia and an ambitious management team who look forward to working with Alkhabeer Capital towards achieving our combined goals,” explained Professor Mohammed Deeb Eed, the group’s founder, in a statement. “We are well positioned to cater to the increasing demand for quality healthcare services, which are driven by the Kingdom’s sound economic fundamentals and its growing population with increasing medical needs. Our team is confident that Alkhabeer’s partnership will help facilitate and lead the growth of our business in the MENA region.”

Government support is indeed a major drive for the increasing investor participation in the healthcare sector. The segment, along with education, continues to be the oil-rich nation’s priority, evident by the Saudi government’s decision to allocate 44% of the country’s 2015 budget to education and healthcare. From 2010-14, the government’s budget appointment to health and social affairs accrued at a cumulative annual growth rate of 15.2% to reach SAR108 billion (US$28.77 billion) in 2014. Healthcare, a fundamental need of society, will remain an integral focus of Saudi Arabia and it is likely that savvy Shariah investors would continue to capitalize on the rising opportunities emerging from this industry.