Healthy premium for Ramsay Health Care with $20 billion KKR takeover bid

Private hospital operator Ramsay Health Care (ASX: RHC) has received a mammoth $20 billion takeover proposal from a consortium of investors led by KKR, with shareholders set to receive a large premium if the deal goes through.

Under the proposal from KKR, Ramsay shareholders would be entitled to receive $88 per share cash - a nearly 37 per cent premium on the company’s closing price as of yesterday afternoon.

The deal, subject to the usual conditions such as shareholder and regulator approval and completion of satisfactory due diligence, would also see RHC shareholders paid a special dividend to distribute all franking credits available to shareholders - valued at around $823 million as at 31 December 2021.

RHC said after reviewing the proposal from KKR, it would grant the investment firm due diligence privileges.

“The discussions between Ramsay and the Consortium are preliminary in nature. There is no guarantee that any further proposal will be forthcoming, that any further proposal would be recommended by the board or that a transaction will eventuate,” RHC said.

“Further, the indicative proposal was expressed to be confidential and the consortium has reserved the right to withdraw the proposal in the event it ceased to be confidential, which has now occurred.”

The proposal comes after a tumultuous period for Australia’s largest private hospital operator which was impacted by COVID-19 restrictions on elective surgeries, resulting in statutory profits declining by 29.7 per cent.

Despite the interruption, KKR’s proposed takeover values Ramsay higher than pre-COVID levels when RHC shares were trading at close to $80 per share.

Since then, shares have bounced around the $65 per share mark, but hit a recent peak of $73 per share in November last year.

KKR’s offer also follows Ramsay Health Care’s $1.4 billion acquisition of UK mental health services provider Elysium Healthcare.

Formed in 2016, Elysium is an operator of hospitals and complex care homes for individuals with mental health conditions.

It was originally started with 22 hospitals, but has since grown organically and through acquisitions to 72 operational sites, approximately 2,000 beds and 6,000 employees, making it a leader in the independent mental health space in the UK.