Ramsay to double UK hospital portfolio in $3.7bn deal

Ramsay Healthcare is hoping to emerge as the UK’s leading private hospital provider in a similar way it became Australia’s No.1 operator in 2005.

London Stock Exchange-listed Spire has recommended shareholders accept the multi-billion takeover from Ramsay.

Australia’s biggest private hospital operator Ramsay Healthcare is about to get bigger, unleashing a plan to spend more than $3.7bn on acquiring a UK chain of hospitals.

London Stock Exchange-listed Spire Healthcare Group has recommended shareholders accept a £2.06bn ($3.7bn) takeover from Ramsay.

It has lobbed an all cash offer of 240 pence per share - a premium of more than 24 per cent on Tuesday’s close - to acquire 100 per cent of Spire’s shares via a scheme of arrangement.

In a statement to the ASX late on Wednesday afternoon, Ramsay said Spire directors have “irrevocable undertaken to vote in favour of the scheme”.

Spire’s London-listed shares surged 29 per cent in early trade on Wednesday. They were last trading at 249 pence eash.

“This transaction will enable Ramsay to build on its established reputation for delivering high quality patient care and outcomes in the UK,” Ramsay chief executive Craig McNally said.

“The proposed combination builds a broader platform to take advantage of the opportunity for sustained growth in the £5.8bn UK private hospital sector, with the aim of delivering best in class healthcare to all patients.”

Spire operates 39 private hospitals and eight clinics across the UK. Once completed, it will almost double the number of hospitals Ramsay operates in the UK to 75, and lift the number of healthcare facilities it operates worldwide to almost 600.

It is similar to Ramsay’s $1.43bn acquisition of Affinity Health in 2005, which doubled the size of its Australian hospital portfolio, seeing it emerge as the country’s biggest private hospital operator with 27 per cent market share.

The Spire proposal comes after Ramsay raised $1.4bn last April to create a war chest to accelerate its out-of-hospital growth strategy and become a fully integrated healthcare company.

Mr McNally said the Spire deal would provide “the foundation for further growth, in line with Ramsay‘s strategic vision of creating the leading ecosystem for patient centric, integrated care.”

On completion, Ramsay is targeting cost savings of at least £26m a year via procurement savings, improved capacity and the cessation of UK listing costs.

Mr McNally said he expected the deal to deliver “high single digit” earnings per share accretion, and return on investment above weighted average cost of capital in FY24.

Spire shareholders are expected to vote on the takeover, which Ramsay will fund from existing debt facilities at a meeting in July.

Mediclinic International and the former Chairman of Spire, Garry Watts, have also “provided irrevocable undertakings to vote in favour of the scheme”, Ramsay said.

“Combined (with Spire’s director undertakings), the irrevocable undertakings represent approximately 30.4 per cent of Spire’s issued share capital,” Mr McNally said.

“Following completion of the transaction, Ramsay will look to manage its wholly owned funding group (WOFG) leverage within its current investment grade credit rating targets, through capital management initiatives and/or a strategic review of the Ramsay Group portfolio of assets,” Mr McNally said.

Ramsay expects to retain its FY21 dividend payout ratio in line with historical levels.