The Ramsay Health Care Limited (ASX: RHC) share price could be one of the leaders today after receiving a takeover offer.
Ramsay is one of the largest private hospital operators. But one day, it may not be on the ASX.
Takeover offer for Ramsay
According to the Australian Financial Review reporting, the private hospital business has received an indicative, non-binding bid to buy the company for more than $20 billion. So, I wouldn’t be surprised to see the Ramsay share price rise today.
According to the ASX, Ramsay Health Care has a market capitalisation of $14.8 billion according to the ASX, so this offer seems quite hefty if it turns into a real bid that can be accepted.
The indicative bid has come from the private equity group KKR (Kohlberg Kravis Roberts & Co).
At this stage, Ramsay Health Care is giving KKR due diligence material so that it can hopefully progress with a more official bid.
According to the Australian Financial Review’s Street Talk, the offer is all-cash, though there is apparently an option for some shareholders to potentially “roll” their stages into the deal.
The largest holder of Ramsay Health Care shares, Paul Ramsay’s Ramsay Foundation, is reportedly supportive of the takeover talks that are happening.
How well are things going?
The recent FY22 half-year result showed ongoing difficulties for the business. While total revenue rose 1.2% to $6.69 billion, the EBIT (EBIT explained) fell 16.2% to $489.2 million, profit before tax dropped 23.8% to $303.7 million and statutory net profit after tax (NPAT) declined 29.7%. The lack of net profit growth has probably been a key factor for the Ramsay share price.
It noted that this result was severely impacted by the disruption from new waves of COVID-19. The negative impact from COVID-19 on the Australian business during the period is estimated to have been $107 million.
Volumes are expected to increase as restrictions ease. though costs remain elevated.
The business is expected to benefit from the additional volume created by the backlog of elective surgery and non-surgical services both in the public and private sector as COVID cases in the community decline.
It recently made a UK acquisition.
Final thoughts on the Ramsay share price
It’s interesting that a bid has come in, it seems like a pretty good one (which could be raised). I’d be happy if I were a shareholder.
There are plenty of ASX growth shares I’d happily put the money towards.
