KKR walks away from bumper Australia healthcare take-private

Ramsay said in a filing that the consortium was unable to break the deadlock by improving its latest offer. Moreover, the consortium felt that information provided in Ramsay’s results for the 2022 financial year implied “meaningful downward pressure on the valuation proposed,” to the point that further discussion and due diligence would prove fruitless without Ramsay adjusting its expectations.

A bid of AUD 88.00 per share for all outstanding shares, less any subsequent dividend payments, was submitted in April, with shareholders invited to cash out or roll over a portion of their interests into the acquisition vehicle. Ramsay’s board permitted non-exclusive due diligence.

However, moving from an indicative to a binding proposal was also subject to accessing non-public information on Ramsay Santé, a Euronext-listed European subsidiary in which Ramsay holds a 52.8% stake. A request was made to the Ramsay Santé board, which sought further information.

The consortium put forward an alternative proposal that wasn’t dependent on access to Ramsay Santé. The price of AUD 88.00 remained, but only for the first 5,000 shares held by each shareholder. For each additional share, it would pay AUD 78.20 in cash and 0.22 Ramsay Santé shares. This would leave the consortium with only a 15% interest in Ramsay Santé.

The Ramsay board rejected this alternative – having calculated that it equated to AUD 84.93 per share – but dialogue continued. Termination of the dialogue prompted a sharp drop in the company’s stock early on September 26, but a gradual recovery saw it close at AUD 59.04, down 2.4% for the day. As of mid-morning trading on September 27, Ramsay was at AUD 58.50.

The company’s revenue came to AUD 13.7bn for the 12 months ended June 2022, up from AUD 13.3bn a year earlier. Meanwhile, EBITDA fell from AUD 2.05bn to AUD 1.83bn, and net profit slid from AUD 511.5m to AUD 379.2m. Mainland Europe, through Ramsay Santé, was the only geography to post an increase in EBITDA, while its net profit more than doubled in euro terms.

Ramsay Santé accounted for the largest portion of overall revenue and EBITDA, contributing AUD 7.06bn and AUD 1.04bn. It has approximately 350 specialist clinics and primary care units in France, Denmark, Norway, Sweden, and Italy, and treats around 7m patients every year.

Ramsay also has a sizeable presence in Australia (72 private hospitals and day surgery units, plus a pharmacy retail franchise) and in the UK (34 acute hospitals and day procedure centres, three neuro-rehabilitation facilities, and a 72-site operation for mental health patients), plus a Southeast Asia-focused joint venture with Sime Darby comprising six hospitals, a nursing college, and a day surgery.

Given the international nature of the business, the consortium was expected to secure financing for the deal through the US term loan B and euro high yield markets in addition to tapping Australia’s debt markets. However, leveraged loan logjam in the US and Europe presented an obstacle.

It was suggested that the consortium either create an opco-propco structure, obtaining cheaper real estate debt financing against the wholly-owned hospitals and standard debt financing for the operating entity, or complete a sale-and-leaseback of the real estate assets.

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• Topics
• Australasia
• Healthcare
• Buyouts
• Australia
• KKR