Australian Unity in talks with KKR to pick up Ramsay assets from deal

KKR has been in talks with parties about a possible sale of Ramsay’s properties. Picture: iStock.

Australian Unity is believed to be talking with Kohlberg Kravis Roberts about buying some of the properties of Ramsay Health Care should the New York-based private equity firm complete its $20bn buyout of the country’s largest private hospital operator.

The Australian mutual company manages the Healthcare Property Trust, which was recently in the cross hairs of rival business NorthWest Healthcare Properties.

Two other groups thought to have held talks with KKR, which may be through its investment banks Barrenjoey and Credit Suisse, include NorthWest, which owns the properties of rival private hospital operator Healthscope, and Charter Hall.

AustralianSuper has been around the hoop early on.

The understanding is that Australian Unity is cashed up and, remember, its healthcare property trust counts Dexus as its cornerstone investor.

KKR has been in talks with parties about a possible sale of Ramsay’s properties, and the understanding is that it is in search of about $8bn-$9bn of funds from a transaction.

But DataRoom understands that all options remain on the table with respect to a deal on its properties, including retaining at least some of the properties for its own real estate fund.

The price for the properties will depend on the rental payment agreements from the operating company, with a higher price probably being at the expense of higher lease payments for the operating company.

One theory building in the market is that KKR will sell the properties to several different parties in a portfolio break-up.

While some sources believe Australian Unity would not have the capital to fund the deal, the group may swallow a smaller part of the portfolio.

DataRoom can also reveal that The Ramsay Foundation, which owns about 19 per cent of Ramsay, will remain a shareholder in the business should it be privatised by KKR in a deal that is likely to take about six months to play out.

Within Ramsay’s portfolio of 50 properties, about five hospitals hold the greatest value. These include Perth’s Hollywood Hospital and the Joondalup Health Campus in Perth’s north.

This is along with the Royal North Shore Hospital in Sydney and the Greenslopes Private Hospital and John Flynn Private hospitals in Queensland. Those assets may be sold in one line to a buyer while the remainder are offloaded elsewhere.

Ramsay’s shares on Tuesday closed at $77.11, below KKR’s $88-a-share bid price, excluding a dividend payment, but market insiders suggest KKR’s acquisition plans remain on track, with the market probably pricing in financing risk. It continues to carry out due diligence.

KKR’s Australian operatives are understood to have sought approval from top New York executives of the buyout fund to embark on a transaction.

It is understood that, of the $12bn-odd amount of equity needed for the transaction, KKR will provide about half, with partners such as Hesta and Abu Dhabi Investment Authority accounting for the remainder.