KKR’s abandoned tilt for Ramsay Health Care opens the way for other suitors

A significant number of acquisitions have been abandoned due to escalating funding costs.

A plan by Kohlberg Kravis Roberts to buy the $16bn Ramsay Health Care may look dead in the water, but that’s not to say there will not be other transactions involving the country’s largest private hospital operator in the months ahead.

DataRoom can reveal that Fresenius Helios was the group that has recently been in talks to buy Ramsay Sante, a France-based hospital operator owned 52 per cent by the Australian-listed Ramsay.

Helios describes itself as one of the largest and most medically advanced operators of both in- and outpatient care in Europe.

Helios owns assets in Spain and Germany, so Ramsay Sante, which is advised by Rothschild & Co and counts Credit Agricole’s Predica as its other major investor, would be a perfect fit.

But Helios did not have the balance sheet to buy the business so the talks were called off.

Yet other suitors have been in discussions about a possible deal.

Meanwhile, others have not given up on the prospect of Ramsay selling at least some of its lucrative real estate assets.

And then there is always the chance that KKR comes back and makes another offer for the company in about six months.

But for now, investors are counting the latest correspondence between Ramsay and KKR as a sure sign that the deal is dead for now, with Ramsay shares closing 10.3 per cent lower on Tuesday to $62.94.

Ramsay told the market on Tuesday that it had received a letter from KKR and its consortium backers on Monday night, saying that it was not in a position to improve the terms of its latest proposal.

It referred to Ramsay’s latest 2022 financial year result demonstrating “meaningful downward pressure on the valuation proposed under the alternative proposal”, which some found curious, given that the bidders would have had access to this information as part of their due diligence on the company.

Ramsay revealed on August 26 that the KKR consortium had withdrawn its original $88 per share cash offer for Ramsay.

The KKR consortium came up with an alternative offer, revealed the day before, that Ramsay had rejected.

The KKR consortium’s alternative offer involved Ramsay shareholders receiving $88 per share cash for their first 5000 Ramsay shares and in excess of that, they would have received $78.20 per share and about 0.22 Ramsay Sante shares.

This was put forward after the KKR consortium struggled to gain due diligence access for Ramsay Sante in France, which has recently been shopped around to possible buyers.

Goldman Sachs and UBS are working as defence advisers for Ramsay, while KKR has been advised by Barrenjoey and Credit Suisse.

Ramsay’s largest shareholder, The Paul Ramsay Foundation, which owns 19 per cent, has been working with Adara Partners.

The latest situation is not good news for deal makers in the market, where funding costs are escalating for buyout proposals and confidence is low due to an uncertain outlook.

A number of other deals are looking shaky, including Dye and Durham’s $2.5bn bid for Link Administration Holdings after the UK’s Financial Conduct Authority ordered Link to set aside up to $519m for possible penalty payments, sending its shares down 20 per cent after a trading halt.

Bidders TA Associates and Solera are likely to also walk away from Infomedia, and BGH Capital’s offer for Pushpay may not result in a deal.

Pallet supplier Loscam called off its sale process until market conditions improve, there are predictions Singapore’s Keppel Infrastructure will make the same call for its chemicals business Ixom, while pricey offers that emerged earlier in the year for Crescent Capital’s radiology provider PRP may no longer be on the table.

A report in The Wall Street Journal this week, suggesting Goldman Sachs is preparing to lay off hundreds of staffers as soon as next week, is telling.

With deals failing to be completed, more job cuts could be on their way in the Australia market as well.

After a record-setting 2021, the industry-wide slump in mergers and new initial public offerings has hit the bottom line of investment banks.

Second-quarter investment-banking revenue fell 41 per cent from a year ago for Goldman Sachs, and Goldman’s profit fell by nearly half in that same period.