Ramsay (ASX:RHC) share price lower on UK acquisition update

Ramsay is having to increase its offer to snare this UK company…

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The Ramsay Health Care Limited (ASX: RHC) share price is edging lower on Tuesday.

At the time of writing, the private hospital operator’s shares are down 0.5% to $62.88.

Why is the Ramsay share price edging lower?

Investors have been selling Ramsay’s shares this morning after it provided an update on its attempts to acquire UK-based private hospital operator, Spire Healthcare.

According to the release, Ramsay has increased its cash offer to acquire Spire to 250 pence per share in cash. This compares to its previous offer of 240 pence per share.

This values Spire’s entire issued and to be issued share capital at approximately GBP1,041 million (A$1,900 million) on a fully diluted basis, and approximately GBP2,105.3 million (A$3,866 million) on an enterprise value basis.

Ramsay notes that the revised offer represents a premium of approximately 30% to the closing price of Spire shares on 25 May 2021. Furthermore, it is a premium of 54% to the volume weighted average Spire share price over the 180 day period ending 25 May 2021.

Final but not quite final offer

Management advised that this offer is final and will not be increased. However, Ramsay reserves the right to increase the offer price if there is an announcement of an offer or a possible offer for Spire by a third party offeror or potential offeror.

Ramsay’s CEO and Managing Director, Craig McNally, said: “We are confident that our 250 pence cash offer per Spire share, which was reached after extensive negotiations with the Spire board, is fair and reasonable. It is therefore our best and final offer.”

“Ramsay is a global health care operator delivering a wide range of acute and primary healthcare services to private and public patients from over 500 locations across 10 countries caring for 8.5 million+ patient visits and admissions per annum. We have been operating in the UK market for 15 years and as such have strong operational insight and a good appreciation of the industry dynamics and long term outlook for the market. We have called on this deep understanding to determine what we believe is a full and fair price for the Spire business,” he added.

Why acquire Spire?

Management has previously stated that it believes the acquisition will be transformational for Ramsay’s UK business. It expects the addition of Spire to create a leading private health care services provider, diversify Ramsay UK’s payor sources and case mix, and expand the geographic reach of its capabilities.

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.

The Ramsay share price is up flat so far in 2021.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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