The Ramsay Health Care Limited (ASX: RHC) share price is under the spotlight today on news that the potential takeover deal has fallen through.
Investors may remember that a few months ago Ramsay was subject to a takeover bid from private equity giant KKR with a $88 per share, $20 billion bid for the company.
What is happening to the Ramsay share price?
At the time of writing, it hasn’t been confirmed by the private hospital company. It has only been reported by the Australian Financial Review.
The AFR said that it understood that KKR & Co sent a letter to Ramsay chairman Michael Siddle on Monday night, reconfirming it would not offer $88 a share all-cash for the company and could not increase its alternative proposal.
The board of Ramsay had reportedly asked KKR to increase its offer to Ramsay Health Care to “keep the situation alive”.
KKR is reportedly not going to increase the bid and Ramsay’s board isn’t relenting on how much they expect to receive from a takeover as well. The board wanted an offer that was close to $88 a share, which is the level that KKR was granted due diligence.
The AFR reported that KKR and other investors suggested the business had “materially deteriorated” over the last six months, so wouldn’t increase its offer. Therefore, KKR reportedly ended the talks.
The latest offer, which was rejected, was that KKR could pay cash for the Australian business, while shareholders would get the stake back in the French business Ramsay Sante. It was reportedly worth $85 a share, though retail investors would have received $88 in value.
What now?
The Ramsay share price’s performance will be guided in the long-term by the performance of the business and general market movements.
There are some potential positives for Ramsay – COVID-19 impacts are dissipating, so the big backlog of operations can be worked through, which will be a boost for shorter-term earnings. However, I’m not sure if the future profitability of the business looks as promising as it did before the pandemic.
With interest rates now significantly higher, I’m not sure how valuable a defensive business like Ramsay is. There are other ASX dividend shares I would prefer to buy for my portfolio
