NSW Nurses and Midwives Association welcomes KKR’s $20bn tilt for Ramsay Health Care

The NSW Nurses and Midwives Association says there are ‘some positive opportunities’ to work with KKR as a potential new owner of Australia’s biggest hospital group.

NSW Nurses and Midwives Association general secretary Brett Holmes: ‘HESTA’s statements give hope that here is a private equity push that is making it very clear that this is not a staff-cutting exercise.’ Picture: NCA NewsWire / Bianca De Marchi

A key nurses union has endorsed Kohlberg Kravis Roberts’ $20bn takeover bid for Ramsay Health Care, Australia’s biggest private hospital operator, believing it will not involve the cost-cutting typical of private equity.

Despite KKR being known as one of the original ‘‘barbarians at the gate’’ over its leveraged buyout of US tobacco and food company RJR Nabisco in 1988, the NSW Nurses and Midwives Association believes there are “positive opportunities” if the deal succeeds.

Ramsay’s shares advanced 3.7 per cent to $82.99 on Thursday, after surging more than 24 per cent on Wednesday, following the indicative takeover offer.

As reported in The Australian on Wednesday, KKR has recruited the nurses and health workers superannuation fund HESTA to a consortium backing the bid.

The support of the nurses union is crucial because Australia is battling a chronic nurse shortage. Attracting more staff is one of the highest priorities for Ramsay – and therefore KKR as a potential owner of the group.

At this stage, as in many deals of this nature, HESTA’s stake in the consortium is fluid, with the funding it will provide not set until due diligence is completed and a binding offer is made.

But its presence as one of Ramsay’s potential owners has given the nurses union comfort that patient care will not be compromised under a successful takeover.

Other potential consortium partners include Australian Super, international pension funds and even Ramsay’s biggest shareholder, the Paul Ramsay Foundation, which has flagged its interest in taking scrip in the delisted entity as well as cash.

HESTA’s involvement also takes the sting out of KKR lobbing its bid in the middle of a federal election campaign, with the fund chaired by former Labor health minister Nicola Roxon.

NSW Nurses and Midwives Association secretary Brett Holmes – a director of HESTA – on Thursday told The Australian he could not speak about the deal from the fund’s perspective.

But from a union perspective, he said it could “have some positive opportunities … to be able to work with new management, particularly given the commitments that HESTA has spoken about in … delivering high standards of patient care, fair pay and conditions for their workers,” he said.

“We’ve always campaigned for better patient care, and that arises out of recognition of your workforce plus making sure that there’s enough of them, and HESTA’s statements give hope that here is a private equity push that is making it very clear that this is not a staff-cutting exercise.”

Mr Holmes was referring to a statement from HESTA chief executive Debby Blakey, who said the takeover “represents an exciting opportunity to invest in the future growth and success of Australia’s leading private hospital provider”. “We believe this investment has the potential to have a positive impact on patient health and wellbeing in Australia and abroad whilst helping to generate strong returns for our members,” Ms Blakey said.

“Ramsay’s care-centred culture is at the heart of its business, driven by dedicated healthcare professionals who deliver outstanding patient outcomes every day. They are vital to the ongoing success of Ramsay and are at the forefront of the consortium’s shared vision for expansion and innovation that can achieve new standards of care and an enhanced employee experience.”

It comes as two years of border closures has exacerbated a chronic nurse shortage. Despite ensuring nurses are paid well, Mr Holmes said another incentive to attract staff in a tight market is adopting nurse/patient staffing ratios, which are common in the public health sector.

Private operators including Ramsay, Healthscope and Healthe have refused union requests to introduce nurse/patient ratios, instead staffing wards based on need. While private operators say this model makes them more responsive to patient needs, Mr Holmes said: “Staffing levels in private hospitals are lower than public hospitals. Nobody should ever fool themselves that private hospitals are providing higher levels of staff than public hospitals.”

“Pay is one issue, but every survey that we do, on top of the list is proper staffing and guaranteed staffing on every shift. And the answer to that is nurse to patient rations.

“They need to be able to say it‘s worth going to work financially but more importantly that they can come home at the end of the day knowing that they are not carrying a bag load of guilt because they haven’t done the work, or haven’t been able to do the work, that their patients need done for them. The care hasn’t been delivered at the standard that they know should be provided to their patients and that’s what drives nurses away.”

The KKR consortium is offering $88 a share, or $20.14bn. If the deal proceeds, Ramsay would be permitted to pay a special fully franked dividend to distribute all franking credits to shareholders. Its franking account balance as of December 31 is $823m.

KKR said it was “confident the premium and certainty of cash offered, together with the material additional value delivered via the release of franking credits, represents compelling value to all Ramsay shareholders”.

Ramsay has granted the consortium non-exclusive due diligence, with analysts tipping more bidders could enter the contest.

Morgan Stanley analyst Sean Laaman said KKR would need to overcome “limiting financial constraints”, which had seen Ramsay’s share price stagnate in the past five years, “driven by staff costs, lower indexation and evolution of alternative care models. The investment case for any acquirer must be beyond these limiting financial constraints”.

Jarden analyst Steve Wheen said a sale and leaseback could generate up to $8.5m, helping fund the deal.