The Ramsay Health Care Limited (ASX: RHC) share price is rising today on potential acquisition news.
What’s the potential acquisition?
Ramsay is one of the world’s biggest private hospital operators.
According to reporting by the Australian Financial Review, Ramsay is looking to team up with PEP – a private equity group – to buy Healthe Care.
Healthe Care is the third largest private hospital operator in Australia. It employs 7,000 people across 34 private healthcare facilities. It’s currently a subsidiary of the Luye Medical Group, the healthcare service division of Luye Life Sciences Group.
According to the newspaper, it has 2,500 beds and 70 operating facilities, generating $1 billion of revenue.
The AFR reported that Ramsay and PEP don’t want to own the private hospitals as a joint venture. Ramsay would try to buy as many private hospitals as it’s allowed to by regulators, while PEP would then buy the rest as a way to start a ‘buy-and-build’ platform.
The regulator is likely to look at this because Ramsay is already the largest operator in the private hospital space in the country. How much market share is a private hospital business allowed to own in each city? This deal would answer that question.
Is the Ramsay share price worth looking at?
The private hospital business has been heavily affected by COVID-19 as the number of private operations has dropped off because of COVID-19.
Don’t forget that Ramsay isn’t just an Australian private hospital operator. It also has exposure to large UK and European hospital networks thanks to its investment in Ramsay Generale De Sante (EPA: GDS).
But that means Ramsay still has the potential to go through a recovery phase in the northern hemisphere.
Ramsay has exposure to the ageing demographics in the countries that it operates in, but it has a bit less potential growth because so many (older) people in Europe have died. I don’t think Ramsay has as much growth potential as it used to.
There are other ASX growth shares that could be able to generate more profit growth over the coming years. Using CommSec forecasts, the Ramsay share price is valued at 25 times the estimated earnings for the 2022 financial year.
