Ramsay Health Care sales news sparks debate on fair value

Analysts disagree over the vlaue of the Ramsay Sante stake.

Ramsay Health Care’s announcement last week that an investment bank was weighing sale options for its Europe arm has raised debate about its true value.

While reporting its results last Thursday, Ramsay announced it had appointed Goldman Sachs to work on strategic options for Ramsay’s French business Ramsay Sante, a business in which it holds a 52.8 per cent stake.

Market sources believe that any buyer of Ramsay Sante would need to outlay at least $2bn.

Analysts have their own views.

Macquarie analysts estimate the value of the potential divestment of a Ramsay Sante stake at about nine times its earnings before interest, tax, depreciation and amortisation, ahead of trading multiples of 7.5 times.

The estimate considered historical transaction multiples and the current operating environment, the analysts said.

“On this basis, we calculate an enterprise value of $2.7bn (a value including its debt) and an equity value of $1.1bn.”

This would provide a valuation uplift of about $2 a share, or about 5 per cent above the current share price.

Meanwhile, analysts at Citi say the mid-point of their range would value the 52.8 per cent stake in Ramsay Sante at $800m or $3.55 per Ramsay share.

Assuming an EBITDA multiple of eight times, they derive an enterprise value of $4.4bn and an equity value of $1.5bn.

Goldman Sachs is known to be one of Ramsay’s bankers, defending the company when it was subject to a buyout proposal in 2023, along with Swiss bank UBS.

Sources say it had unofficially been searching for an interested buyer for Ramsay Sante for some time.

While some last week took the public announcement of Goldman Sach’s involvement as a signal that a sale could be close or a buyer had been found, market sources say that still no suitor has come forward.

There are obvious candidates, but not yet any bilateral talks.

Ex-Woolworths executive Natalie Davis has taken the reins at Ramsay as its new chief executive after joining in October.

The British and European businesses have no synergies with Ramsay’s operations in Australia and are less profitable.

After it wrote down the value of the British business by $305m and made a $64.5m tax provision to its European business Ramsay Sante, Ramsay Health Care posted a $104.9m loss for the six months to December.

This came as revenue gained 6 per cent, with higher costs hurting margins.

DataRoom reported in 2022 that Fresenius was running the ruler over the Ramsay Sante business for a possible purchase, but it walked away.

It also reported in September that investors were lobbying the board, now led by David Thodey, for a restructure after suitor Kohlberg Kravis Roberts walked away from an initial proposal to buy the business in 2022 for $88 a share – or $20bn.

Shares are now $36.18, rallying almost 7 per cent on the news on Thursday of a process for the European arm.

Ramsay’s largest shareholder is The Paul Ramsay Foundation, which owns 19 per cent.

Ramsay first purchased hospitals in France in 2010.

Ramsay Sante is the second-largest private care provider in Europe.

Based in France, it has 465 hospitals, clinics, primary care and imaging centres.

Major equity holders of Ramsay Sante, listed on Euronext Paris, are Predica with almost 40 per cent and Credit Agricole group’s personal insurance ­subsidiary.