Ramsay Health Care opens door to $20bn-plus KKR deal

Ramsay said it continues to actively engage with the private equity-led bid, but there could be one sticking point.

Ramsay is Australia’s biggest private hospitals operator.

Ramsay Health Care has left the door open over striking a deal on $20bn-plus takeover approach led by private equity major Kohlberg Kravis Roberts, but the future of the private hospital operator’s part-owned French unit could prove a sticking point on any deal.

Marking the first comments on the takeover approach since the deal emerged in April, Ramsay said it continues to actively engage with the KKR consortium, which includes health-focussed super giant Hesta and Abu Dhabi Investment Authority. However it has told shareholders to take no action in relation to the proposed deal.

Earlier this year Ramsay, which is being advised by UBS and Goldman Sachs, confirmed the indicative takeover approach from the KKR consortium pitched at $88 a share. The enterprise value of the takeover, which includes debt held by Ramsay, would be closer to $27bn. Ramsay shares on Thursday closed at $72.92. Prior to the bid being made public in April they were trading closer to $64 each.

The potential takeover has put a sale and leaseback of Ramsay’s real estate portfolio back on the agenda – a move analysts expect could generate up to $8.5bn, helping fund the transaction.

Ramsay’s board and management have given the KKR-led consortium access to its books in recent months and following these talks the consortium has “confirmed the key terms of its indicative proposal, including price, and that it has not identified any matters that would cause the consortium to terminate its pursuit of the indicative proposal,” Ramsay said in a statement.

Ramsay Health Care’s biggest shareholder, the Ramsay Foundation, is believed to have expressed support for the takeover talks when it first emerged.

However one of the requirements of the takeover moving ahead was KKR getting access to due diligence on Ramsay’s 52.8 per cent-owned French hospital business Ramsay Sante, which ranks as the second largest private hospital operator in Europe. Given Ramsay Sante is a listed company Ramsay cannot give it due diligence directly.

While the KKR-consortium has made a request to push ahead with due diligence, the French hospital business has sent back a list of questions to KKR seeking further information about the structure and plans in the bid.

It is understood KKR has been holding on to the questions for some weeks but yet to respond to them.

Early in its approach KKR put forward an alternative bidding structure which would see Ramsay shareholders retain a separate shareholding in Ramsay Sante, but the bid for Ramsay would be reduced to $78 a share. But the Australian health care company has considered this and concluded it would be “meaningfully inferior” to the headline offer of $88 cash per share.

It has ended talks on the alternative proposal but is willing to engage on the original $88 per share offer. For now though it is continuing on a business as usual case. In recent weeks Ramsay was involved in a bitter standoff with private health fund Bupa on a patient funding deal. Although the pair this month came to a deal.

“Ramsay remains focused on its business, driving its strategy to be a leading integrated healthcare provider of the future and the creation of long-term value for shareholders,” the hospital operator said.

Ramsay, founded by the late Paul Ramsay in 1964, owns 72 private hospitals in Australia and has extensive operations in the UK and Europe. Its global network extends across 10 countries, with more than eight million admissions/patient visits to its facilities across more than 32 locations.

Ramsay is scheduled to deliver its full year results on Friday.