A proposal may be brewing involving Ramsay Health Care’s European joint venture partner that will pave the way for Kohlberg Kravis Roberts to buy Australia’s largest private hospital operator.
The understanding is that one option being explored has been a deal by Ramsay Sante’s investors to buy out the 52.5 per cent interest in the European private hospital business from majority shareholder Ramsay Health Care.
The challenge for KKR in buying Ramsay Health Care has been gaining the due diligence material it needs to undertake the checks on the Ramsay Sante operation.
Only 50 per cent of the directors on the Ramsay Sante board represent the interest of Ramsay Health Care, and the Ramsay Sante company is hesitant about handing over sensitive financial information for the buyout fund to scrutinise the operation, given KKR owns the competing Elsan private hospital business in France.
It is thought to be behind the delay in KKR submitting a final proposal to buy Ramsay.
KKR has been conducting due diligence on the Australian-listed Ramsay after it lobbed an $88 per share offer for the company in April that valued the target at $20bn.
Following the offer, Ramsay opened its books for KKR to conduct due diligence on the global healthcare provider to determine whether it can put forward a binding offer that is acceptable to Ramsay’s directors.
Ramsay Santé is the second largest private care provider in Europe, operating specialist clinics and primary care units in approximately 350 locations and is listed on the European financial markets platform Euronext and has a EUR2.44bn market value (AUD $3.56bn)
It is the market leader in France, but also has operations in Denmark, Norway, Sweden and Italy.
It has 36,000 staff and its facilities treat about seven million patients each year.
In a typical environment, the 52.5 per cent stake delivers the lowest returns out of all of Ramsay’s global operations.
Some have suggested that Ramsay’s stake in Ramsay Sante could be worth about $1.92bn.
KKR’s Elsan also may pose a challenge to Ramsay in getting a deal across the line when it comes to gaining approval from the French competition watchdog.
Some market analysts believe that such a move could be complex, but would offer a clean solution for KKR to put forward an offer for the remainder of the company and would not involve a partial buyout by KKR that would see Ramsay investors left with what is arguably the worst performing arm of the Ramsay Health Care business.
Shares in Ramsay have been trading below KKR’s initial offer price, with scepticism in the market that the buyout will occur in a period of market volatility and rising funding costs.
Shares on Tuesday closed at $70.31 in late market trade, valuing the group at $16.2bn.
Sources suggest that KKR has its funding in place for a transaction and challenges accessing material for the France operation has always been the stumbling block for the transaction.
Meanwhile, in Australia, sources say that KKR continues to explore a possible sale of Ramsay’s real estate should it be successful in acquiring the company.
Australian superannuation fund Hesta is backing KKR on its buyout proposal, as is the Abu Dhabi Investment Authority and Singapore’s GIC.
Superannuation funds such as AustralianSuper have considered taking stakes in Ramsay’s real estate portfolio should the KKR deal proceed.
However, sources have said that one of the challenges in terms of pulling together a separate real estate transaction is that superannuation funds are hesitant about signing confidentiality agreements for a possible real estate deal because by doing so, they are restricted from trading Ramsay shares.
Ramsay was expected to offer a market update following a board meeting in the past week.
Working for KKR are Barrenjoey and Credit Suisse, while UBS and Goldman Sachs are advising Ramsay.
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