Ramsay Health Care’s French arm and an improving valuation raises questions about KKR’s next move
Ramsay Health Care’s French business has been highlighted as the sticking point for Kohlberg Kravis Roberts when it comes to a buyout.
But some believe it is not only its France-based Ramsay Sante investment that is keeping KKR executives awake at night.
As time ticks by since KKR first made an indicative offer for Ramsay in April, Ramsay’s earnings outlook is anticipated to be improving, which makes the target worth more.
The KKR indicative offer of $88 a share was enough to buy the private equity group the right to carry out due diligence. More than three months later there is still no news about where things are at on the transaction.
Some believe the ball is now in the court of Ramsay Health Care, and an announcement on the state of the deal is due out shortly – potentially when it announces its results.
Ramsay shares on Tuesday closed at $70.57, which indicates that the market has doubts about a deal going ahead.
Funding had earlier been discussed as a factor that would come into play for KKR when it comes to valuing the business, and some believe this may lead to a price cut.
But equally, healthcare providers overseas lately have been giving strong outlook statements. And Ramsay is expected to do the same when it delivers its results on August 26.
Private hospital providers’ earnings have been hard hit during the pandemic and its aftermath, amid surgery cancellations and staff shortages.
But a major backlog of cases now exists that will create a windfall for healthcare providers over an extended period.
According to medical data to the end of June, surgical numbers did not recover, falling 2.4 per cent for the 2022 financial year in Australia. Yet on a per business day basis, they were up 3.7 per cent. In the US, specifically, the surgical sector has seen an improvement.
As Ramsay’s outlook becomes stronger, the company’s board can argue that the target is worth more. No doubt not far from the Ramsay directors’ minds would be the decision by
Sydney Airport’s board to sell one of the nation’s most valuable assets for $23.6bn in what was its worst-ever trading period in history, only for it to stage a strong recovery this year with borders reopened and international travel back in strong demand.
Gaining access to the business in which Ramsay owns 52.5 per cent in France, Ramsay Sante, is understood to be a challenge for KKR. The New York-based private equity firm has a lot riding on the deal that has been in the works for months.
It may be keen to buy all of Ramsay for cash if it can obtain due diligence materials for Ramsay Sante or all of Ramsay except the Ramsay Sante stake.
There have been challenges gaining the due diligence material because some believe Ramsay Sante is keen to buy out Ramsay as the major shareholder of the joint venture.
Ramsay Sante is the second-largest private care provider in Europe, operating specialist clinics and primary care units in about 350 locations.
It is listed on the European financial markets platform Euronext and has a €2.4bn ($3.5bn) market value. It is the market leader in France, but also has operations in Denmark, Norway, Sweden and Italy.
Some have suggested that Ramsay’s stake in Ramsay Sante is worth about $1.92bn.
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