Investors reacted warily to the surprise $1.8 billion takeover bid from private health group, Ramsay Health Care for a UK private hospital operator.
Ramsay shares eased 3.4% to close at the day’s low of $62.30 on the ASX today as traders digested the news and the bid financing and structure.
Ramsay is Australia’s largest operator and the deal it revealed late on Wednesday evening is for a company called Spire Healthcare, which is one of the UK’s major private hospital groups.
Ramsay told the ASX and then a late analysts briefing that it had made an all-cash offer to acquire 100% per cent of Spire Healthcare, which operates 39 hospitals and day clinics across England, Wales and Scotland.
With Ramsay’s existing facilities, the merged company will own 73 hospitals and day care centres across the UK, though some may have to be sold to get competition approvals.
Ramsay has offered to buy all shares at 240 pence each — a price tag of £1 billion. With debt that puts Spire’s total value at $3.7 billion.
Ramsay says it will fund the acquisition through its existing debt facilities. It raised $1.4 billion a year ago in the depths of the pandemic which helped it get through the pain of lockdowns and other disruptions.
Ramsay says it is looking for £26 million pounds ($36 million) a year in cost cuts, as well as leading to high single-digit growth for earnings per share by 2024.
The deal is subject to a review from the UK’s Competition and Markets Authority, which may ask Ramsay to divest certain assets after the merger is completed. The proposal is set to be put to Spire shareholders in three weeks.
Ramsay chief executive Craig McNally told investors and analysts the company had been watching Spire for a decade and was now confident enough to buy the company in hopes of creating a more diverse healthcare network in the United Kingdom.
“We have been interested in Spire for the last 10 years and the planets have finally aligned at a time when there has never been a greater need for quality healthcare operators that can deliver outstanding patient outcomes in the UK market,” he said.
Spire is the UK’s second-largest private operator and is listed on the London Stock Exchange. Ramsay currently holds 8% of the UK hospital market and Spire 17%. Mr McNally said the deal would “provide the foundation from which we can pursue further growth opportunities in the UK”.
Ramsay’s half-year profits dropped 12.5% thanks to elective surgery shutdowns as well as opening up its resources to public health systems in Australia, the UK and France to help fight COVID-19.