KKR puts out an $88 cash offer for Ramsay Health Care

It means that the biggest acquisition of the year is at stake,

KKR Alternative Proposal

Ramsay revealed the terms of KKR’s alternative proposal on Thursday night, as the hospital group and its French company Ramsay Sante prepared to release earnings updates to investors.

KKR’s alternative proposal would have all Ramsay shareholders pay $78.20 in cash for Ramsay’s Australian operations, before receiving cash or vouchers for the Sante stake.

Small Ramsay parcel owners — those with 5,000 shares or less, which is by far the majority of the group’s investors by number — would receive $88 in cash, while those with more than 5,000 shares would receive shares in Sante.

The main price of the cash/scrip offering, for those with more than 5,000 shares, was $84.93 late Thursday, which was not high enough for the Ramsay board.

While both sides, having gone down the garden path for months, want to keep talking, a fairly clear and fundamental gap in their expectations has emerged.

Ramsay’s board is clinging to the $88-per-share cash structure that made KKR struggle in the first place.

KKR, having been unable to obtain diligence in Sante, went ahead and withdrew that offer. He wants to talk about the alternative proposal.

Ramsay’s revelation on Thursday night and KKR’s letter on Friday morning should bring to a head a situation that has been brewing for the last five months.

Sante, despite representing only about a tenth of Ramsay’s value, was always going to be the potential hindrance.

KKR owns a stake in Elsan, the other big French hospital group, while Sante has some determined directors who were never going to allow the Elsan co-owner to go into due diligence without some guarantees.

KKR would have known. Ramsay, who has representatives on Sante’s board, definitely knew.

The question is why it took five months for it to finally emerge as the battleground, and why both sides have let it go so long without a solution they can both live for.

Hedge funds hope KKR can come back with a higher cash component in the alternative proposal, which could break the deadlock and win Ramsay’s approval.

UBS and Goldman Sachs are advising Ramsay, while KKR’s advisers are Barrenjoey Capital Partners and Credit Suisse.

Ramsay shares last traded at $72.92.

It came as Ramsay delivered his FY22 results on Friday morning. He reported revenue up 3 percent to $13.75 billion and EBITDA up 10 percent to $1.83 billion.