Punters poured into shares of Ramsay Health Care on Wednesday after it confirmed that it is talking to a “consortium of financial investors” led by US private equity giant, KKR about a buyout worth as much as $20.1 billion.
That $20.1 billion value of the indicative offer was well above Tuesday’s closing value of $14.8 billion when Ramsay shares finished at $64.39, down 0.3%.
On Wednesday they leapt more than 24% or $15.61 to end at $80, well short of the indicative $88 buyout price. They got as high as $83.55.
Ramsay is providing KKR with due diligence after the buyout giant made an indicative and non-binding offer to acquire the company.
Market reports suggested that others in the KKR group include industry fund Hesta and the Abu Dhabi Investment Authority, a sovereign wealth fund.
Ramsay said Wednesday in a statement to the ASX that under the Indicative Proposal, shareholders would be entitled to receive $A88 a share cash, less any ordinary or special dividends paid to shareholders after the date of the Indicative Proposal (including the ordinary dividend of $0.485 per share paid on 31 March 2022).
Seeing the highest Ramsay shares have been in the past five years was $A80.26 in February, 2020, just as the pandemic was closing in on the Australian (and other) economies, the offer price will be a winner, so long as everything else is ticked off.
Ramsay said shareholders would also have the option to receive part of the consideration in unlisted scrip in the Consortium holding entity.
“If the scheme of arrangement were implemented, Ramsay would be permitted to pay a fully franked special dividend to distribute all available franking credits to shareholders. The franking account balance as at 31 December 2021 (prior to the payment of the FY22 Interim Dividend) was $823 million.
“The Indicative Proposal is subject to a number of conditions, including (but not limited to): • completion of satisfactory due diligence; • no disposal of any of Ramsay’s subsidiaries or properties; • final approval of the Consortium’s investment committee; • entry into a scheme implementation deed on customary terms and conditions; • regulatory approvals (including Foreign Investment Review Board); and • Ramsay shareholder approval.”
“Having reviewed the Indicative Proposal with its advisers and sought further information from the Consortium in relation to its sources of funding, structure and the regulatory approvals required to complete any transaction, the Ramsay Board of Directors has determined it appropriate to provide the Consortium with due diligence on a non-exclusive basis to explore whether the Consortium can put forward a binding proposal that is in the best interests of Ramsay’s shareholders.
“As announced on 22 March 2022, the shareholders of Ramsay Sime Darby Health Care Sdn Bhd are exploring a potential sale of Ramsay Sime Darby. Ramsay continues to pursue this transaction and the Consortium’s access to due diligence has been provided on this basis.
“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.
“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.”
So will the putative buyers now walk away?
There are a lot punters who think they won’t.
The board of Ramsay healthcare should have really told KKR to make its indicative offer, revealed that in an announcement to the market, delayed diligence and seen if a rival bid or two might have emerged and engineered an auction that would have benefited shareholders.
KKR has clearly made what it though was a knockout indicative offer to try and forestall any rival bidders. But the media leak on Tuesday has flushed the news out into the market and given any rivals (at a rich price) time to decide.
Now the bid news is out in the market, KKR can walk away – that would see the share price slump sharply and probably hurt KKR’s reputation. Ramsay board and management made a mistake in allowing KKR the right to walk away without a financial penalty.
