The Ramsay Health Care Limited (ASX: RHC) share price will be one to watch on Thursday.
This follows the announcement of a potential new acquisition after the market close today.
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What did Ramsay announce?
This afternoon Ramsay announced that it has made an all-cash offer of 240 pence per share to acquire 100% of Spire Healthcare Group plc shares via a scheme of arrangement. This represents a premium of approximately 24.4% to the closing price of Spire shares on 25 May.
According to the release, Spire is a London Stock Exchange-listed independent hospital group in the United Kingdom with a focus on the private patient market. It is also a leading provider of high-acuity care.
The offer of 240 pence per share values Spire's entire issued and to be issued share capital at approximately 1 billion pounds (A$1,822 million) on a fully diluted basis and approximately 2 billion pounds (A$3,707 million) on an enterprise value basis.
The good news for Ramsay and its shareholders is that the Spire Board is unanimously recommending its shareholders vote in favour of the scheme. In addition, directors that own shares have irrevocably undertaken to vote in favour of the scheme, as has major shareholder Mediclinic International and the former Chairman of Spire, Garry Watts.
Though, Mediclinic International's vote is subject to no competing higher offer emerging at 10% or more than the offer consideration.
Combined, the irrevocable undertakings represent approximately 30.4% of Spire's issued share capital.
Acquisition rationale
Management believes the acquisition will be transformational for Ramsay's UK business.
It is expecting it to create a leading private health care services provider. It will also diversify Ramsay UK's payor sources, and case mix, expanding the geographic reach of its capabilities and improving capacity utilisation.
Ramsay also expects the acquisition to establish an enhanced offering for private patients, deliver scale to further invest in clinical research, development and innovation to improve patient outcomes, and provide the foundation for further growth. This is in line with Ramsay's strategic vision of creating the leading ecosystem for patient centric, integrated care.
Positively, for shareholders and the Ramsay share price, the deal is expected to deliver significant value. This will be driven by benefits of at least 26 million per annum from procurement savings, improved capacity utilisation, and cessation of UK listing costs. This is forecast to result in high single digit earnings per share accretion in FY 2024.
Ramsay will be funding the acquisition through debt. And despite taking on the extra debt, it has no plans to change its dividend payout ratio in FY 2021. It intends to keep it in line with historical levels.
