The competition for the Healius day hospitals is moving into the second round, and one of the suitors said to be throwing a lot at it is Ramsay Health Care.
The market is awaiting news over whether Kohlberg Kravis Roberts is going to buy Ramsay after first putting forward an informal $20bn offer in April.
But sources say the nation’s largest private hospital operator is getting serious about buying the Healius unit, with a compelling proposal for the division.
Ramsay is including contract deals surrounding pathology and diagnostic imaging services as part of its Healius proposal.
Pathology and diagnostic imaging are the core businesses of Healius. Some say it seems an odd move given that Ramsay is in play – KKR has been carrying out due diligence on the group for months and a decision on whether it puts forward a binding proposal is expected any day.
Ramsay reports its full-year result on Friday and is likely to be pressed about its intentions to expand further into the area of day hospitals, with investors keen to know whether the group gets swallowed by private equity and at what price.
The indicative price KKR offered was $88 a share, but Ramsay’s shares on Tuesday closed at $72.10, indicating the market is sceptical that a sale, if any, will occur at that price.
The process for the Healius day hospitals will involve a second stage consisting of two parts. Offers for the first part of the second stage will be due in the week of September 19 and one or two parties will be ushered through to the final round.
A move into day hospitals would be a strategic shift for Ramsay, but sources believe the step is logical, given that its health insurance customers are advocating the day centre model for procedures.
The questions likely to be asked are where it fits with health funds, and would doctors be offered equity in the Healius day hospital business should it be bought by Ramsay? It is thought a buyer would need to pay $150m-$200m to be successful.
About five offers came in from the first round of the competition on August 12. They were believed to be from Intermediate Capital Group, Alceon’s Special Medical Services, Nexus Day Hospitals (owned by Queensland Investment Corporation), and Fresenius (which owns Cura Day Hospitals).
The Healius day surgery business was formed from the purchase of the Montserrat group of seven day surgeries in 2018 for $138.5m. Most of the earnings come from one site – the Westside Private day hospital in Queensland.
Healius is a major player in day hospitals in a fragmented industry, and Montserrat has experienced strong growth since being purchased by Healius.
For the six months to December, the Healius day centre unit generated $8.4m of earnings before interest, tax, depreciation and amortisation, down 19 per cent on the previous corresponding period.
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