It has been a stunning day for the Ramsay Health Care Limited (ASX: RHC) share price on Wednesday.
In morning trade, the private hospital operator's shares have rocketed 28% higher to $82.50.
Why is the Ramsay share price rocketing higher?
Investors have been bidding the Ramsay Health Care share price higher today after the company confirmed speculation that it has received a takeover offer.
Ramsay Health Care revealed that it has received a conditional, non-binding, indicative proposal from a consortium led by private equity giant KKR.
According to the release, the KKR consortium has tabled an $88.00 cash per share offer to acquire Ramsay, less any dividends. This includes the recently paid interim dividend for FY 2022.
This offer represents a premium of 36.7% to the Ramsay Health Care share price at the close of play on Tuesday.
Ramsay will also be allowed to pay shareholders a fully franked special dividend, which would reduce the offer price accordingly. This is so the healthcare giant can distribute all available franking credits to shareholders. Prior to its most recent dividend, Ramsay's franking account balance was a sizeable $823 million.
Potential spanner in the works
While Ramsay has granted the KKR consortium with due diligence, it highlights that the offer was made on the condition that it remained confidential.
Now that the proposal has leaked, the KKR consortium can walk away from talks without penalty.
This adds an element of risk that could explain why the Ramsay share price isn't trading even higher and a touch closer to the offer price today.
In addition, the proposal is subject to a number of conditions such as regulatory approvals. This includes FIRB approval.
Ramsay intends to keep the market informed as things develop.
