By Scott Murdoch and Harish Sridharan
(Reuters) -Australia’s largest private hospital operator Ramsay Health Care Ltd said on Wednesday it received an unsolicited A$20.05 billion ($14.80 billion) indicative takeover offer from a consortium led by private equity giant KKR & Co, sending Ramsay’s shares 30% higher.
If successful, the takeover would rank as the biggest private equity-backed buyout of an Australian company, and would be the biggest deal in Australia this year, nearly doubling activity, according to Refinitiv data.
Ramsay said in a statement it would provide the KKR-led consortium with due diligence on a non-exclusive basis and talks were at a preliminary stage.
Australian pension fund HESTA and sovereign fund Abu Dhabi Investment Authority are participants in the consortium, according to a source with direct knowledge of the matter. The person declined to be named as the companies’ involvement was not public.
There was no immediate comment from HESTA and Abu Dhabi Investment Authority.
The proposal comes as record-low interest rates prompt private equity firms, superannuation and pension funds with ample liquidity to invest in healthcare and infrastructure assets.
The non-binding proposal of A$88 cash per share represents a premium of nearly 37% to Ramsay’s Tuesday closing price of A$64.39. The offer sent the hospital operator’s shares up as much as 30% to A$83.55 in early trade, their biggest-ever intraday jump.
Ramsay said it had reviewed the proposal with its advisers and asked for further information from the consortium in relation to its funding and structure of the deal.
KKR did not immediately respond to a Reuters request for comment.
Refinitiv data shows total deal value of $17.4 billion in Australia so far this year, with a 41% slump in the first quarter from a year earlier. The country saw a flurry of blockbuster takeovers in the past year, including the purchase of Sydney Airport and Block Inc’s takeover of buy-now-pay-later star Afterpay.
The coronavirus pandemic has weighed on healthcare operators including Ramsay, with the shutdown of non-urgent surgeries, staffing shortages due to isolation regulations, and upward wage pressure weighing on earnings. That has made the sector relatively affordable for buyouts compared with a few years ago.
Last year, Australian biopharmaceutical giant CSL Ltd said it would buy Swiss drugmaker Vifor Pharma AG for $11.7 billion.
The deal would represent a substantial return for the Paul Ramsay Foundation, the company’s biggest shareholder with an 18.8% stake.
Started by Paul Ramsay in 1964 by converting a Sydney guest house into one of the country’s first psychiatric hospitals, the Foundation sold nearly 11% of the company in 2019 for A$61.80 per share, far lower than KKR’s indicative price.
The foundation did not immediately respond to a request for comment from Reuters.
Ramsay operates hospitals and clinics across 10 countries in three continents, with a network of more than 530 locations, according to its website.
It has 72 private hospitals and day surgery units in Australia, while it operates clinics and primary care units in about 350 locations across six countries in Europe.
KKR currently owns French healthcare group Elsan.
Earlier this year, Ramsay and Malaysia’s Sime Darby Holdings received a $1.35 billion buyout offer from IHH Healthcare Bhd for their Asia joint venture. Ramsay said it was still pursuing this transaction.
The hospital operator has hired UBS AG’s Australia Branch and Herbert Smith Freehills as financial and legal advisers, respectively, for the KKR-led consortium’s proposal.
($1 = 1.3535 Australian dollars)
(Reporting by Scott Murdoch, Harish Sridharan, Anshuman Daga and Byron Kaye; Editing by Sriraj Kalluvila, Aditya Soni and Krishna Chandra Eluri, Rashmi Aich and Kenneth Maxwell)