Ramsay may say adieu to its poor-performing French hospitals

Potential options for Ramsay Health care are selling its 52.3 per cent holding in Ramsay Sante, its UK operation or its Nordic hospitals.

Ramsay Health Care could move to sell non-performing hospital assets within its France-based Ramsay Sante business, as buyers are understood to be thin on the ground for the unit as a whole.

Pressure is mounting on Ramsay Health Care chairman David Thodey to boost the company’s share price after a potential buyout by KKR for $88 a share, or $20bn, failed to eventuate last year.

This was considered to be partly due to the challenges getting a handle on the performance of the French operation.

Most see the solution as selling its 52.3 per cent holding in Ramsay Sante, its United Kingdom operation or its Nordic hospitals.

However, Ramsay’s UK hospital business is now performing far more strongly, while the Nordic hospital business is also a good performer, although it only accounts for about 25 per cent of its earnings in Europe.

Healthcare workers have recently been on strike in France, to the detriment of Ramsay Sante, but the dispute has now been resolved.

An agreement has been reached with the French government around funding which had earlier been seen as unfavourable towards private hospital operators.

Tariffs for hospital services provided by the government have now been set in place for the next few years, enabling any buyer of Ramsay Sante to more easily forecast earnings.

The obvious buyer is considered to be the hospital group Elsan, which is about 43 per cent owned by KKR.

However, another option is selling the poor-performing hospitals within Ramsay Sante, causing the overall business performance to improve and the stock to be rerated.

Private equity buyers would likely take the non-core hospitals off its hands.

It comes as a private hospital review by the government here has been triggered after not-for-profit healthcare providers battle for survival.

Challenges of not-for-profit hospitals could play into Ramsay’s hands, where it can take over the management of the assets and potentially get patients to cross over to Ramsay.

The earlier hope had been to convince Ramsay to spin off Ramsay Sante and hand over the shares to investors through an in specie distribution.

Ramsay’s largest shareholder is The Paul Ramsay Foundation, which owns 19 per cent, and the company first bought French hospitals in 2010.

France-based Ramsay Sante is the second largest private care provider in Europe and has 443 hospitals, clinics, primary care and imaging centres across Europe.

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.

Long term, Ramsay’s prospects are strong, due to an increasingly ageing population, despite short term industry head winds like cost pressures and staff shortages.

Ramsay reported a 286 per cent increase in its net profit for the six months to December to $758.5m.

Shares in Ramsay closed on Friday down 11c to $48.29.