Ramsay Health Care shares dive after $20bn takeover by KKR killed off

A consortium led by US private equity titan KKR told Ramsay if it revised its offer it most likely would be lower than higher, triggering the collapse of takeover talks.

Ramsay’s board said it ‘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’.

Shares in Australia’s biggest private hospital operator, Ramsay Health Care, have dived to an 18-month low after US private equity titan Kohlberg Kravis Roberts officially killed takeover talks.

Ramsay has been working with a KKR-led consortium – which included the nurse superannuation fund HESTA – to sweeten an alternative proposal after it withdrew its $88 a share, or $20bn, all cash offer.

KKR had lowered its bid to $84.93 a share, comprising cash and scrip, after it failed to complete due diligence on Ramsay’s 52.8 per cent French business Ramsay Sante.

But Ramsay said in a statement to the ASX on Monday that KKR said it was “not in a position to improve the terms of the alternative proposal” and as a result had ceased talks with the group.

Further, KKR told Ramsay that if it revised its proposal, it could be lower than higher after the company posted a 38 per cent slide in annual profit last month.

“Ramsay and its financial advisers have engaged with the consortium and its financial advisers in an effort to understand whether the consortium is able to put forward a new proposal that would provide appropriate value for shareholders and be able to be implemented in a reasonable timeframe,” Ramsay said.

“Whilst the consortium recognised that further engagement and access to further due diligence may provide some positive visibility, the information provided in the FY22 results implies that there is meaningful downward pressure on the valuation proposed under the alternative proposal.”

Ramsay said its board remained “open to engaging in relation to a change of control proposal that provides appropriate value for shareholders and has sufficient certainty of completion.

“(But) it is apparent that this is unlikely to be forthcoming in the near future. The Ramsay board and the consortium have mutually agreed to terminate discussions.”

The news sent Ramsay’s shares tumbling as low as 5.2 per cent to $56.40. It later regained some ground to close 2.4 per cent lower at $59.08 – its lowest closing price since January last year.

It is understood that KKR relied on Ramsay to grant it access to Ramsay Sante, rather than directly approach the French company’s board, which had the sole authority to grant due diligence.

Ramsay Sante attempted to engage with KKR, sending it a list of questions about its intentions for the company. But KKR did not provide responses to these questions.

Complicating matters further is the fact KKR owns Ramsay Sante competitor Elsan, making Ramsay’s French arm reluctant to open its books to the New York-based private equity giant, known as one of the original ‘‘barbarians at the gate’’ over its leveraged buyout of US tobacco and food company RJR Nabisco in 1988.

Ramsay’s majority stake in Ramsay Sante – valued at €1.24bn ($1.84bn) – has therefore created a defence mechanism to ward off takeover suitors, given its complexities, which also include French regulatory approval.

The end of takeover talks comes after KKR sent a letter to Ramsay chairman Michael Siddle that was made public two weeks ago and said that it was prepared to walk away unless Ramsay agreed to a new price – a textbook bear hug by KKR. In other words, it was hoped that Ramsay’s investors might blink in the face of the loss of value and force the board back to the negotiating table to accept a lower price.

Instead, Ramsay’s board rejected the revised offer. On Monday, it said it “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 company will provide a business update in November.