Wesfarmers runs ruler over Ramsay Health Care

Ramsay group operates hundreds of high-quality healthcare facilities and services across eight countries, employing 88,000 healthcare professionals.

The $74bn Australian listed conglomerate Wesfarmers is understood to have been carrying out detailed work in recent months, weighing up the merits of buying Ramsay Health Care.

It is understood that Perth-based Wesfarmers – which owns Target, Kmart, Officeworks and other industrial and healthcare assets – is interested in securing Ramsay’s Australian business.

However, with its shares performing strongly and a $74bn market value, it’s not inconceivable that Wesfarmers buys all of the $12bn private hospital operator and sells off the international assets to other parties.

Some believe that the timing could now be right for Wesfarmers to embark on its next major acquisition, after bedding down the 2022 purchase of Priceline pharmacy chain owner Australian Pharmaceutical Industries for $763m to seed its healthcare unit.

Whether it remains serious about a deal remains unclear. Wesfarmers is usually assessing the acquisition of a handful of targets at any given time, and maintains an active mergers and acquisitions team.

It has looked at plenty of opportunities in the past before opting to walk away, and can treat targets as simply a due diligence exercise.

Another possibility is that it could simply be weighing up a tilt at Ramsay’s pharmacy unit, which it has expressed interest in before.

Still, Wesfarmers’ share price has rallied since the start of this year so it could take advantage of that, while the healthcare sector has been struggling with high costs and staff shortages, dampening the performance of Australian listed stocks trading in the space, including Ramsay.

Also weighing in Wesfarmers’ favour is the fact that Ramsay’s shareholders have been unhappy with the company’s performance since Kohlberg Kravis Roberts walked away from a bid in 2022, causing its share price to tumble, and they could be more open to a buyout.

The David Thodey-chaired Ramsay is believed to be thinking about a potential exit from its European hospital owner, Ramsay Sante, in which it has a 52.79 per cent stake.

At its half-year results, Ramsay said that it would “continue to review the business in the context of optimising shareholder returns” and “actively assessing a number of strategies to unlock value”.

Wesfarmers has made its intentions to expand further into the healthcare industry clear for some time, setting up a unit dedicated to the space.

Wesfarmers’ healthcare unit is run by former BUPA Health Insurance boss Emily Amos and has former KKR Australia head Ed Bostock as its chief financial officer.

DataRoom understands that Wesfarmers has carried out work on all aspects of the Ramsay business, including its real estate, and has been speaking to healthcare funds and industry figures.

It may be that it has since walked away, nervous about the state of the industry, according to some market sources.

However, the fundamentals of the Australian healthcare sector remain strong, despite its recent challenges, with the country’s ageing population and increasing use of technology in the sector.

Investment banks UBS and Goldman Sachs are close to Ramsay.

KKR put forward an informal $88 a share offer for Ramsay in 2022 but did not follow through on a deal, later lowering the price for all remaining assets except Ramsay Sante.

The offer was not accepted by directors.

Shares are now at about $50.

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

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

Established by the late Paul Ramsay, the global Ramsay group operates hundreds of high-quality healthcare facilities and services across eight countries, employing 88,000 healthcare professionals.