The Ramsay Health Care Limited (ASX: RHC) share price is dropping hard as investors learned that the takeover talks have ended.
Ramsay is one of the largest private hospital operators outside of the US. It was recently a takeover target by private equity group KKR.
Takeover talks end
A couple of weeks ago, Ramsay told investors about correspendence from the KKR consortium that said it was not in a position to improve the terms of its alternative proposal.
That alternative proposal was that Ramsay shareholders have been able to receive $88 cash per share for their first 5,000 shares. The offer for each Ramsay share in excess of 5,000 shares would be $78.20 cash and approximately 0.22 Ramsay Sante shares – this is a European-listed business of which the ASX-listed Ramsay owns a significant chunk.
The consortium noted that while “further engagement and access to further due diligence may provide some positive visibility, the information provided in the FY22 results implies that there is meaningful downward pressure on the valuation proposed under the alternative proposal.”
What has happened since?
Over the past two weeks, Ramsay and its financial advisers have been talking with the KKR consortium and their advisers about whether a new offer was possible in a reasonable timeframe.
Ramsay said it has become apparent that a new offer isn’t coming. The private hospital operator concluded:
While the Ramsay Board remains open to engaging in relation to a change of control proposal that provides appropriate value for shareholders and has sufficient certainty of completion in a reasonable timeframe, it is apparent that this is unlikely to be forthcoming in the near future. The Ramsay Board and the Consortium have mutually agreed to terminate discussions.
Ramsay remains focused on its business, driving its strategy to be a leading integrated healthcare provider of the future and the creation of long-term value for shareholders.
Ramsay will provide a business update in November 2022.
Summary thoughts on the Ramsay share price
Ramsay is the sort of healthcare business that has plenty of long-term potential thanks to ageing demographics, a growing population and so on. However, the Ramsay share price hasn’t performed strongly over the past five years.
There’s probably a recovery-from-COVID play with Ramsay shares as delayed surgeries finally happen, so I’m not saying it’s not an opportunity. But, it’s just not the type of business I’d buy for my own portfolio.
