Ramsay Health Shares Hit 5-Month Low on KKR Deal Issue

Shares of Australian private hospital operator Ramsay Health Care Ltd. declined on Tuesday after a consortium headed by US private equity firm KKR & Co. Inc. chose not to raise its $14.5 billion cash-and-stock takeover offer for the company, potentially suspending the deal.

The decision decreased Ramsay’s stock by almost 11% to A$62.82, hitting a five-month low. The stock was last trading 10.3% lower to A$62.94.

That compares with the A$64.39 posted on the previous day, before the bid of the New York-based investment group was announced, and a post-bid high of A$84.58 reached in April.

Sydney-based Ramsay stated that KKR, citing the healthcare provider’s recent performance, said it would discuss terms that work for both parties, provided that the company can change its valuation expectations and is open to a new proposal.

In the previous financial year, Ramsay’s registered a 39% drop in its net profit to $274 million, with severe COVID-related disruptions and cost pressures due to higher inflation mainly contributing to the slump.

KKR Deal Potentially On Ice

Ramsay, earlier this year, had been presented with an all-cash offer from the consortium, which also comprises Australian pension fund HESTA and the UAE sovereign wealth fund Abu Dhabi Investment Authority (ADIA).

The group initially proposed that Ramsay’s shareholders would receive A$88 per share for the first 5,000 shares owned by each holder, but it was revised in August.

Instead of A$88 for only the first 5,000 shares, holders with more stake in the company will receive around A$78 per share, plus a share in Ramsay Generale de Sante, the firm’s French arm.

Ramsay did not accept the revised proposal, believing it deemed the company undervalued.

It is now uncertain whether the private hospital operator will agree to the alternative deal. Ramsay warned that the KKR-led group might bring its offer further down, considering the firm’s recent annual earnings.

Sources with knowledge of the matter previously said KKR failed to access Ramsay Sante’s accounts to perform due diligence. It was also one of the reasons the consortium had to revise the offer.