Ramsay to triple French presence … again
Recommendation
Not six months ago, Ramsay Health Care purchased the largest operator of psychiatric hospitals in France, Medipsy, for €150m (about $220m), but it now looks like that was just an apéritif.
Ramsay Santé, a joint venture between Ramsay and Crédit Agricole Assurances, is now in exclusive talks to buy an 83% stake in Euronext-listed Générale de Santé, the largest private hospital operator in France. This will be Ramsay’s fifth major acquisition in the country following its purchase of Ramsay Santé in 2010, Clinique Convert in Rhône-Alpes in 2011 and Clinique de l’Union and Medipsy in 2013.
Générale de Santé operates 75 hospitals and clinics, employing 19,000 people. The company has revenue of around €1.9bn and earnings before interest and tax (EBIT) of €104m.
The deal would be worth €788m for the 83% stake (valuing the company at €944m or about $1.4bn) with Ramsay contributing up to €539m to match its proportional ownership of Ramsay Santé. This would give Ramsay an underlying controlling stake of 57%.
The deal places Générale de Santé’s enterprise value (EV) at 15 times EBIT. This looks like a fair price, especially when you consider Ramsay itself has an EV/EBIT ratio of 22.
The proposal isn’t legally binding but Ramsay has an exclusivity period that ends on 6 Jun 14. If the deal does go through, Ramsay intends to fund the purchase with debt and Générale de Santé would be fully consolidated for Ramsay’s financial reporting.
The Générale de Santé proposal has come just a week after Ramsay Health Care’s founder and chairman, Paul Ramsay, died after suffering a heart attack in Spain. His 36% stake in the company, worth more than $3bn, has been left to his personal foundation to fund charitable causes in what will be the largest philanthropic donation in Australian history.
Ramsay Health Care’s share price is down 4% since Ramsay Health Care: Interim result 2014 (Sell – $48.91) and, despite being a superb operator, we continue to believe the company is overvalued and recommend you SELL.