Ramsay Health Care lines up for Cura Group

Ramsay Health Care is keen to buy more day surgeries. Picture: iStock

Private equity and infrastructure investors may be getting a run for their money from a dominant industry rival in the contest for Cura Group, with Ramsay Health Care the latest name to surface.

Sources have suggested that Ramsay is weighing a tilt at the Australian day hospital owner. But the big question is whether it can navigate challenges around competition laws, with the Australian Competition and Consumer Commission likely to have something to say about an acquisition.

Previously, when the Health Care day hospitals came up for sale in Australia, Ramsay partnered with private equity firm Pacific Equity Partners to buy the assets, but later staged a retreat.

It could be that should it join forces with a buyout fund, it would be able to pick up one or two hospitals out of the offering.

Ramsay has looked at Australian healthcare opportunities in the recent past, and has signalled that acquisitions were on its agenda.

It likes mental health assets, which also may make Aurora Healthcare (currently up for sale through UBS) also interesting to Ramsay, but again, the ACCC is likely to have concerns.

Ramsay is the country’s largest private hospital operator with 73 private hospitals and day surgery units in Australia, and its market dominance has meant that Europe and the UK has been more of its hunting ground in the past.

Then there is also Cura’s doctor ownership model that may deter Ramsay, and shareholders may take exception to it embarking on a deal at a time it currently has a higher than normal debt level.

Jarden is believed to be advising Ramsay on Cura Group, which is up for sale through investment bank Citi.

Private equity firms Crescent Capital and ICG, advised by Miles Advisory and Rothschild & Co are also bidding.

The information memorandum for the sale process was due out in late July, and bids are due in August.

It is understood that doctors own only about 2 to 3 per cent of the business, after they earlier controlled as much as 30 per cent when the company was owned by ICG.

Other suitors keen are anticipated to be infrastructure funds, with Morrison & Co being discussed as the most likely bidder of them and Morgan Stanley Infrastructure is likely to be interested.

Healthcare fund Hesta is known to be keen to buy assets directly - the question is whether it would partner with Ramsay on a deal.

Queensland Investment Corporation will be one to watch – it owns the national network of short stay hospitals Nexus Hospitals, which last year purchased Montserrat Day Hospitals from Healius.

But the question is whether QIC wants to double down at a time some question whether it has the funds to take on rival global private equity bidders and large infrastructure funds.

Some believe it is not lining up because it is in fundraising mode.

Should it remain keen, though, strong synergies could exist for an acquisition, which would make it competitive.

PEP also will likely be there, but only at a price.

The understanding is that Cura Group currently generates about $42m of annual earnings before interest, tax, depreciation and amortisation, which could see it change hands for a price between $500m and $600m, or 12 to 14 times EBITDA.

Cura Group is owned by Germany’s Fresenius, and the business has been identified as non-core by the global healthcare provider.

Fresenius Medical Care purchased a 70 per cent stake in Cura in 2017 from Intermediate Capital for a price believed to value the company at more than $400m.

Listed in Germany, Fresenius has been subject to shareholder activism, with activist fund manager Elliott Investment Management on its share register.

Cura Group is the largest day hospital owner across Australia, with 19 assets.

Sources say the opportunity for ICG is to bring the business together with surgical day hospital provider PresMed which it owns.