In what would be one of the country’s largest leverage buyouts, a consortium led by US private equity firm KKR has offered to buy Australia’s largest private hospital operator for A$20.1 billion ($14.9 billion).
The offer valued Ramsay Health Care at a 37 percent premium to the company’s closing share price of A$64.39 on Tuesday, and it was the latest in a succession of take-private mergers in Australia. When the markets opened on Wednesday, Ramsay’s stock was up 27%.
Shareholders would receive A$88 per share in cash, with the option of investing some of it in the company’s unlisted shares.
According to data from Refinitiv, the acquisition would be the latest in a run of mergers and acquisitions in Australia, which saw A$308 billion in deals in 2021, compared to a 10-year annual average of A$100 billion.
Many of these transactions were large public-to-private transactions spearheaded by foreign private equity firms and Australian and international pension funds. Brookfield Asset Management, a Canadian investment business, made a $2.7 billion bid for Uniti, a telecommunications company, and Blackstone, a US private equity firm, paid $6.4 billion for casino operator Crown this year.
The magnitude of KKR’s offer dwarfs those transactions, bringing it closer in scale to Global Infrastructure Partners and IFM Investors’ $23.8 billion all-cash takeover of Sydney Airport, which was completed earlier this year.
However, unlike that deal, KKR’s offer might be financed in part with debt.
The consortium’s other members were not named, but sources acquainted with the matter claimed they included a mix of Australian and international pension and sovereign wealth funds.
According to one person familiar with the negotiations, the Ramsay Foundation, Ramsay’s largest shareholder with around 19 percent of the company, was tentatively in favor of the purchase.
KKR, which has $471 billion in assets under management, has become a more aggressive dealmaker in Australia. In December, the corporation paid $3.7 billion for energy infrastructure company Spark Infrastructure as part of a partnership that included Canadian pension funds.
In the same month, KKR acquired a majority ownership in Colonial First State, a former part of the Commonwealth Bank of Australia.
Ramsay Shares Soars
Ramsay Health Care, a takeover target, may receive further proposals as a result of a $20 billion bid put up by a consortium of investors led by global powerhouse KKR, which is expected to attract more bids.
During Wednesday’s session, Ramsay stock jumped more than 25% after the company, which owns and manages Australia’s largest private hospital network, said it had received a proposal for $88 per share.
Early in the session, they touched a high of $83.55 before closing up 24.2 percent to $80.00.
According to sources familiar with the conversations, KKR has been interested in Ramsay for some time and has been mulling a move since the beginning of last year. Other domestic blue chip companies and superannuation firms, notably HESTA, the nation’s industry super fund for healthcare workers, are thought to be part of the consortium of investors.
The KKR deal, according to Jarden healthcare analyst Steve Wheen, will inspire other parties to make competing offers.
“I would definitely look into private equity and industry super funds,” he said. “Through sale and lease back operations, there is a significant amount of wealth that may be crystallized [in the business].”
Other bidders could emerge from the woodwork, according to Jason Kururangi, portfolio manager at Milford Asset Management.
He believes that a takeover would allow the new owners to restructure the company and give them the opportunity to divide the property assets into a distinct company, potentially in the form of a real estate investment trust.
