Double amputation sees Ramsay’s shares plummet

Shares in Ramsay Healthcare (ASX: RHC) collapsed on Tuesday as two deals believed to be in the works disappeared within days with only a brief explanation to the market and shareholders.

The first deal involving the sale of Ramsay’s hospital businesses in Malaysia and Singapore disappeared at the end of last week.

The second, a $28 billion acquisition by KKR and a group of other investors that would have been Australia’s biggest takeover of 2022, fell apart after weeks of talks that made no progress.

So the shares fell on Tuesday – dropping about 10% to $62.942 after falling below $60 at one point, leaving them nearly 30% below KKR’s initial offer price.

KKR withdrew its first offer of $88 per share in late August and presented an alternative that was described by some analysts (and Ramsay) as weaker.

KKR and its group had been unable to access due diligence of Ramsay’s operations in France and instead wanted to acquire Ramsay’s Australian operations and sell its 52.8% stake in Ramsay Sante in France to investors from Ramsay.

KKR’s alternative proposal would see all Ramsay shareholders pay $78.20 in cash for Ramsay’s Australian operations, before getting cash or certificates for the stake in the French operations.

Smaller Ramsay plot holders – those with 5,000 shares or less, representing by far the majority of investors in the group by number – would have been paid $88 in cash, while those with more than 5,000 shares would receive shares of the French company.

Ramsay’s board wanted KKR to stick with the price of the first offer or improve the terms of its alternative proposal.

That seems to have been the sticking point and on Monday night KKR told Ramsay no $88 cash offer and that wouldn’t improve his alternative proposal.

In a one-page statement Tuesday, Ramsay explained:

“The latest correspondence received from the Consortium refers to its review of Ramsay’s FY22 earnings announcement and notes that it is unable to improve the terms of the alternative proposal.

“The correspondence also indicates that while the Consortium recognizes that greater engagement and access to due diligence can provide some positive visibility, the information provided in FY22 results implies that there is pressure to significant drop on the valuation proposed under the alternative proposal.

“The correspondence also indicated that if Ramsay’s board was willing to reset valuation expectations and consider a new proposal, the consortium would move quickly to discuss mutually agreeable terms.

“Ramsay’s board has yet to review correspondence which was received late last night and appeared in the media early this morning, but there is no certainty that another proposal will be presented or that a proposal will result in a transaction,” the letter ended.

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