KKR leads record $14.8 billion bid for Australia’s Ramsay Health Care

Trading information for KKR & Co is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 23, 2018. REUTERS/Brendan McDermid

April 20 (Reuters) – A group led by KKR & Co (KKR.N) launched an unsolicited offer of nearly $15 billion for Ramsay Health Care Ltd (RHC.AX) on Wednesday, underlining the funds’ current appetite repurchase for health assets and pushing shares of the Australian company rose 30%.

If successful, the takeover would be the biggest private equity buyout of an Australian company, and would also be the biggest deal in Australia this year, nearly doubling activity, according to Refinitiv data.

Ramsay said in a statement that he would provide the KKR-led group with due diligence on a non-exclusive basis and that talks were at a preliminary stage.

Australian pension fund HESTA and sovereign wealth fund Abu Dhabi Investment Authority are participating in the consortium, according to a source with direct knowledge of the matter. The person declined to be named because the companies’ involvement was not public.

HESTA and Abu Dhabi Investment Authority did not immediately respond to requests for comment.

The non-binding proposal comes as historically low interest rates prompt private equity firms, pension funds and pension funds with ample liquidity to invest in health and infrastructure assets.

The proposed A$88 cash per share, worth a total of A$20.05 billion ($14.8 billion), represents a nearly 37% premium to Ramsay’s closing price on Tuesday of 64.39 Australian dollars. The bid sent the shares up 30% to A$83.55 in early trading, their biggest intraday jump, before paring gains to 25%.

“The 31.3% premium to Ramsay’s price over the past six months is reasonable for a change in control,” said Brian Freitas, an analyst who posts on the Smartkarma research platform.

“The share offering implies a forward earnings multiple of 33 times versus an average of 17 times for its peers, so shareholders are expected to agree with the proposed offer price.”

Ramsay said he reviewed the proposal with his advisers and requested additional information from the consortium regarding its funding and the structure of the deal.

KKR did not respond to a request for comment.

Refinitiv data shows a total deal value of $17.4 billion in Australia so far this year, with a 41% drop in the first quarter from a year earlier. The country has seen a wave of successful takeovers over the past year, including the purchase of Sydney Airport and Block Inc’s takeover of buy-it-now, pay-later star Afterpay. Read more

The coronavirus pandemic has weighed on healthcare operators, including Ramsay, with elective surgeries halted, staff shortages due to isolation regulations and upward wage pressure weighing on revenue .

Last year, Australian biopharmaceutical giant CSL Ltd (CSL.AX) announced an $11.7 billion bid for Swiss drugmaker Vifor Pharma AG (VIFN.S). Read more

The latest deal would represent a substantial return for the Paul Ramsay Foundation, the company’s largest shareholder with an 18.8% stake.

Launched by Paul Ramsay in 1964 by converting a Sydney guesthouse into one of the country’s first psychiatric hospitals, the Foundation sold nearly 11% of the business in 2019 for AU$61.80 a share.

The foundation did not immediately respond to a request for comment.

Ramsay says it operates hospitals and clinics in 10 countries on three continents, with a network of more than 530 locations. It has 72 private hospitals and day surgery units in Australia, while it operates clinics and primary care units in approximately 350 locations across six countries in Europe.

KKR currently owns French healthcare group Elsan.

Earlier this year Ramsay and Sime Darby Holdings of Malaysia received a $1.35 billion takeover offer from IHH Healthcare Bhd (IHHH.KL) for their joint venture in Asia. Ramsay said he is still pursuing this transaction.

Ramsay hired UBS and Herbert Smith Freehills as financial and legal advisors, respectively, for the KKR-led consortium proposal. KKR is advised by Barrenjoey Capital and Credit Suisse, sources say.

($1 = 1.3535 Australian dollars)

Reporting by Scott Murdoch, Harish Sridharan and Anshuman Daga; Additional reporting by Byron Kaye; Editing by Sriraj Kalluvila, Aditya Soni and Krishna Chandra Eluri, Rashmi Aich and Kenneth Maxwell

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