KKR-led group offers to buy Australia’s Ramsay Health Care for roughly $14.9 billion
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3 min read . Updated: 20 Apr 2022, 07:57 PM IST - Ramsay is the country’s largest private-hospital operator
A KKR & Co. Inc.-led consortium offered to buy Australian private-hospital operator Ramsay Health Care Ltd. for roughly $14.9 billion, raising the private-equity firm’s bet on growing demand for healthcare.
Ramsay on Wednesday said it had received a nonbinding, indicative proposal from a consortium of financial investors led by New York-based KKR to acquire the company for 88 Australian dollars, equivalent to $65, a share in cash. The stock closed Tuesday at A$64.39.
Australia-listed Ramsay said that the consortium had requested confidentiality but that it disclosed the proposal because of media speculation. The Australian Financial Review, a local media outlet, reported the approach late Tuesday. Shares in Ramsay closed 24% higher Wednesday, having jumped as much as 30% intraday to a near-record high.
Private-equity executives have highlighted healthcare as a fast-growing area of the economy with room for consolidation.
For KKR, one of the world’s oldest and largest private-equity firms, its most recent private-equity forays into healthcare are its 2021 investments in China’s Suzhou Quanyi Health Pharmacy Chain Co. and Therapy Brands Inc., an Alabama-based provider of clinical and administrative software. It has been an investor in the Philippines’ largest private-hospital chain, Metro Pacific Hospital Holdings Inc., since 2019 and has a stake in India’s Max Healthcare Institute Ltd.
KKR has a number of Australian investments including a 55% stake in wealth manager Colonial First State Investments Ltd., which held a 0.28% interest in Ramsay at March 31. Its Australian healthcare assets include oncology specialist GenesisCare.
KKR’s bid for Ramsay is the latest private-equity play in Australia’s healthcare sector. Rival Healthscope Ltd. was acquired by Brookfield Asset Management Inc. in 2019, while Australia’s Pacific Equity Partners bought Healthe Care’s surgical acute-care arm from China’s Luye Medical Group in 2021.
It adds to a general flurry of deal activity in recent times, in Australia and globally. Mergers and acquisitions hit a record in 2021, fueled by low interest rates and a surge in private-equity fundraising.
At more than $24 billion, the value of mergers and acquisitions activity in Australia so far this year is the second highest year-to-date total since 2015—only outpaced by the same period last year, according to data provider Dealogic. The value of pending and completed Australian healthcare deals—excluding the Ramsay approach—has quadrupled from last year.
Ramsay said that the talks with KKR were preliminary and that the consortium could withdraw the proposal now that it was no longer confidential.
The consortium includes sovereign-wealth funds as well as international and local investors including Australia’s Hesta superannuation fund, a person familiar with the matter said. The person was speaking on condition of anonymity because they weren’t authorized to discuss the proposal. Hesta couldn't be reached for comment.
KKR had been interested in Ramsay for several months and the consortium is two weeks into a four-week examination of Ramsay’s books, the person said. Ramsay said it had opened its books to the consortium on a nonexclusive basis. KKR would be a long-term investor and is interested in growing Ramsay, the person added.
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Ramsay is Australia’s largest private-hospital operator and operates in the U.K., France, Scandinavia, Malaysia and Indonesia. In Australia’s private hospital sector, Ramsay has 28% of beds, double the market share of Healthscope, its next-largest rival, analysts said.
A KKR acquisition of Ramsay could be Australia’s largest-ever leveraged buyout by a private-equity company, said Devon Funds portfolio manager Victoria Harris.
It shows “there’s still a lot of debt around to fund these acquisitions," Ms. Harris said. She said Devon has held an interest in Ramsay for a number of years.
The proposal would need shareholder approval, among other requirements, to proceed.
The Paul Ramsay Foundation—a philanthropic organization set up by Ramsay’s founder that held a 19% stake at March 31—said it was supportive of the proposal, noting an option to receive securities in the unlisted holding entity.
Ramsay said it was continuing to mull the potential sale of its Asian joint venture, Ramsay Sime Darby. Ramsay and partner Sime Darby Holdings Bhd. last month received a takeover proposal from IHH Healthcare Bhd. at a conditional enterprise value of about $1.35 billion.
This story has been published from a wire agency feed without modifications to the text