The Ramsay Health Care Limited (ASX: RHC) share price is up 2% after announcing that it is entering into a global supply chain joint venture.
Its partner is called Ascension, the largest private, tax-exempt, non-governmental health organisation in the United States.
Ramsay said that the joint venture will combine the purchasing power of the St. Louis-based Ascension, the world’s largest Catholic health system and Ramsay Health Care. Of course, readers will know Ramsay as one of the world’s largest private hospital operators that operates over 230 facilities in six countries across four continents.
The joint venture company will be owned equally by Ramsay and Ascension. It will start by identifying an initial group of product categories to achieve procurement savings.
Ramsay also said that in time it will include more product categories and will explore broader business development opportunities that are expected to generate further commercial benefits for the two entities.
This new joint venture will apparently be undertaken with minimal cost to each group and the initial savings will be slightly earnings per share (EPS) accretive to Ramsay in the short-term.
Ramsay didn’t flag this as a material announcement. To start off with, it won’t be – but it could turn into something quite material if it develops into a major player for product procurement, particularly in the huge US market.
I like Ramsay as an investment idea due to the quality of the business and long-term ageing of the population. This doesn’t change its figures much in the near future, but at 20x FY19’s estimated earnings I think it represents attractive long-term value.
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Motley Fool contributor Tristan Harrison owns shares of Ramsay Health Care Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.