Spire rejection fails to curb Ramsay’s enthusiasm for acquisitions

Ramsay will continue to pursue acquisition deals despite almost one-third of Spire Healthcare shareholders rejecting its takeover bid.

Ramsay Healthcare had hoped to take over Spire Healthcare to become the UK’s No.1 private hospital operator.

Ramsay Healthcare chief executive Craig McNally says the company will continue to chase expansion via acquisitions despite it failing to gain support from the majority of Spire Healthcare shareholders to take over the British health group.

Ramsay raised $1.4bn in April last year to create a war chest to accelerate its out-of-hospital growth strategy and become a fully integrated healthcare company. Mr McNally says the company would continue with that strategy.

“Our strong balance sheet and cashflows position us well to deliver on our long-term strategy,” he said.

“We will continue to look for opportunities to invest and modernise our facilities and footprint in all regions and to leverage the scale of our world-class hospital network.

“We have a significant pipeline of brownfield and greenfield projects in Australia and will continue to investigate adjacencies in all our markets to create an integrated patient-centric business platform.”

And Mr McNally said the UK was ripe for growth.

“We see a significant growth opportunity for Ramsay in the UK market where we have a strong, established relationship with the NHS (National Health Service) and the ability to increase our private patient presence,” he said.

“We stand ready to provide support in tackling the significant increase in elective surgery waiting lists in both the private and public systems and are already seeing growth in the mix of our private insurance volumes.”

His comments come after almost one-third of Spire shareholders rejected Ramsay’s $3.7bn bid to take over the company, forcing it to scratch its plans and “focus on strengthening its existing business” instead.

“Given the strong strategic fit and the support of Spire’s board and major shareholder, we are disappointed not to be in a position to proceed with the Spire acquisition,” Mr McNally said.

“However, we believe it’s important to maintain our financial discipline and focus on long-term value creation for shareholders.

“We remain committed to delivering best in class healthcare and high-quality patient outcomes in the UK through investing in clinical excellence, working closely with our doctors and clinicians and leveraging our expertise across the Ramsay Group.”

In late May, Ramsay announced that Spire directors had “irrevocably undertaken to vote in favour of the scheme”. But it was not enough to convince shareholders.

Ramsay had hoped to acquire Spire, which operates 39 hospitals and eight clinics in the UK, to become Britain’s No.1 private hospital operator. It would have almost doubled the number of hospitals Ramsay operated in the UK to 75, and lifted the number of healthcare facilities it operated worldwide to almost 600.

The plan was similar to Ramsay’s $1.43bn acquisition of Affinity Health in 2005 that doubled the size of its Australian hospital portfolio, resulting in it emerging as the country’s biggest private hospital operator with 27 per cent market share.

The coronavirus pandemic has laid bare the risks of relying on hospitals for earnings growth and fast-tracked the need to integrate more health services into Ramsay’s global portfolio of 500 hospitals and clinics.

“The primary reason for the capital raising was to be able to capitalise on opportunities as they present coming out of this virus,” Mr McNally said in April last year.

“Hospitals are still a key part of our business and will continue to be. But we want to broaden our service profile, so non-hospital healthcare services are something we are keen to do and then integrate those.”

Ramsay shares closed up 0.7 per cent at $63.97.