DUBAI, May 14 (Reuters) - State-owned Saudi Arabian Airlines (Saudia) has selected Jeddah-based hospital operator Dr. Soliman Fakeeh Hospital as a preferred bidder for its medical unit, sources familiar with the matter said.
Saudia said in a statement emailed to Reuters on Monday that it had concluded the bidding process for its medical unit - Saudi Medical Services. It did not name the bidder, saying the partner would be announced after the completion of required approvals.
Three sources familiar with the transaction said Dr. Soliman Fakeeh Hospital had been selected as a preferred bidder in the deal which is estimated to be worth about 650 million Saudi riyals ($173 million). The sources declined to be named due to commercial sensitivities.
The Saudi government is working on a pipeline of privatizations as part of economic reforms aimed at diversifying the Gulf Arab state's economy away from oil.
Soliman Fakeeh declined to comment, while the financial adviser for the sales process, Jadwa Investment, was not immediately available to comment.
Sources told Reuters in May last year that the transaction could fetch $500 million.
However, one of the sources said on Monday the airline's initial price expectations had been high and the deal structure had changed.
The two sides are still negotiating the final terms of the deal, the source added without elaborating.
Saudia Medical Services owns a major hospital in Jeddah, Saudi Arabia's second biggest city.
The medical business is a major healthcare provider to Saudia and a number of its group companies, providing outpatient services such as occupational and aviation medicine in Jeddah.
Saudia has been spinning off some subsidiaries through stock market listings - it listed Saudi Airlines Catering in 2012.
The sale of its medical business would be a complete exit, Reuters has reported.
($1 = 3.7503 riyals) (Reporting by Hadeel Al Sayegh and Saeed Azhar; Additional reporting by Marwa Rashad in Riyadh; Editing by Ghaida Ghantous and Mark Potter)