Ramsay Healthcare has gone back to the UK private health sector with a very different and lower priced expansion idea.
Instead of paying $3.7 billion to expand further in the UK private hospital system as it tried earlier this year in the rejected bid from shareholders in Spire healthcare, Ramsay yesterday revealed a $1.4 billion cash and debt funded purchase of Elysium Healthcare (Elysium).
According to Ramsay’s ASX statement, the purchase will give it “a leading provider of mental health care services in the UK” and will start making a contribution to earnings growth in the 2023 financial year.
“The acquisition is expected to deliver mid-single digit EPS (earnings per share growth) accretion in FY23 and meets Ramsay’s internal investment return criteria including a post-tax cash ROIC (Return On Invested Capital) target of greater than 10% by Year 5 and a post-tax IRR (Internal rate of Return) of greater than 10%.”
The market didn’t greet the deal with open arms – Ramsay shares eased 0.9% to $68.85.
Ramsay described Elysium as “a leading independent operator of long-term medium and low secure hospitals and complex care homes for individuals with mental health conditions and has a strong partnership with the NHS. The CEO of Elysium, Joy Chamberlain, has led the business since it was formed in 2016 and will remain as CEO of the business following completion of the acquisition.”
“The business was originally formed with 22 hospitals and has grown organically and through acquisitions to 72 operational sites and approximately 2,000 beds. Elysium is now a leading provider in the independent mental health services market in the UK. The business employs approximately 6,000 people.
“Following five years of rapid growth, Elysium reported unaudited revenue of £349m and EBITDAR of £65m for the 12 months ended June 2021.This result does not reflect a full year run rate of the recent investment in capacity, with an additional c.190 beds created in the 12 months to the end of December 2021 representing an approximately 9.5% increase in capacity over that period.
“Elysium operates across the acuity spectrum of the UK mental health market with a particular focus on high acuity care.”
Ramsay believes the purchase offers it “a platform for growth through full utilisation of recently developed capacity, and delivering on its development pipeline, combined with potential bolt-on opportunities.”
Ramsay CEO, Craig McNally said in Monday’s statement “This is an excellent opportunity for Ramsay to expand its successful health care services platform in the UK through the acquisition of an established and reputable business, with a strong track record of growth and a robust pipeline of development opportunities. It will build on the Ramsay brand and quality reputation with doctors, payors and patients in the UK market.”
Mr McNally said that the acquisition opens up the company to a huge market opportunity in the UK.
“The acquisition of Elysium will expand Ramsay’s patient pathways into the £15bn UK mental health market at a time when more and more people are seeking support for mental health, learning difficulties and neurological issues. It will provide opportunities to leverage the expertise of Elysium and Ramsay’s existing mental health facilities and clinicians in Australia, France, and Sweden to drive improved patient outcomes across our mental health activities globally.”
