More messing about than merging and acquiring

Company News

by Glenn Dyer

Monday saw the death knell finally rung for two of the… shall we say, less professional business entanglements in recent memory – although we all know nothing is forever in M&A.


It’s official – Ramsay Health Care (ASX:RHC), the country’s largest private hospital operator, and US buyout group KKR have stopped talking and walked away from any future dealings.

In short, Ramsay wanted the $88 a share first offered, KKR dropped that and offered variations on a lower price and shares in one of Ramsay’s subsidiary hospital owning companies in Asia, which would have effectively lowered the overall value of the second offer.

In announcing the end to any more talks on Monday, Ramsay referred to the announcement on September 13 that ended KKR (and a group of investors)’s first and second offers to acquire Ramsay.

“As announced on 13 September 2022, Ramsay Health Care Limited received correspondence on 12 September 2022 from a consortium of financial investors led by KKR regarding its conditional, non-binding, indicative proposal to acquire 100% of the shares in Ramsay by way of a scheme of arrangement.

“That correspondence noted that the Consortium was not in a position to improve the terms of the Alternative Proposal and that, whilst the Consortium recognised that further engagement and access to further due diligence may provide some positive visibility, the information provided in the FY22 results implies that there is meaningful downward pressure on the valuation proposed under the Alternative Proposal.

“Since the announcement of 13 September 2022, Ramsay and its financial advisers have engaged with the Consortium and its financial advisers in an effort to understand whether the Consortium is able to put forward a new proposal that would provide appropriate value for shareholders and be able to be implemented in a reasonable timeframe.

“Through this engagement it has become apparent that the Consortium is unable to provide a new proposal at this time,” Ramsay told the market.

So no more talks but Ramsay’s board made it clear in the statement that its door remains open.

“While the Ramsay Board remains open to engaging in relation to a change of control proposal that provides appropriate value for shareholders and has sufficient certainty of completion in a reasonable timeframe, it is apparent that this is unlikely to be forthcoming in the near future. The Ramsay Board and the Consortium have mutually agreed to terminate discussions.”

Ramsay said its still focused on its business, driving its strategy to be a leading integrated healthcare provider of the future and the creation of long-term value for shareholders.

Ramsay said will provide a business update in November 2022. That will presumably occur at the AGM on November 29 when shareholders are hoping for a fuller explanation about why the KKR group went cold on the record buyout price of $88 a share.

The slump in global markets since the $88 a share was first offered has had a lot more to do with that bid failing than admitted by anyone so far. Ramsay shares were at $64.27 when the $88 a share offer popped up (they ended at just under $60 on Monday at $59.08, down 2.4%). The bid premium over the market price was made unsustainable by the 1,000 point or 14% slump (up till last Friday) in the ASX 200 since then.


Meanwhile, shares in Link Administration (ASX:LNK) slumped on Monday after its two-year courtship by four would be suitors including Carlyle Group of the US and, most recently, Canada’s Dye and Durham finally ended thanks to Link’s involvement in the collapse of a big UK investment fund and the possible $600 million in penalties and other payments flowing from that failure.

The not unexpected failure of the tiresome takeover saga emerged in a court hearing in Sydney last Friday when Link said it would miss the deadline to complete the deal, so it was off.

The Dye & Durham deal was the fourth buyout proposal for Link in past two years and almost got there except the UK entanglement which finished off the final $4.81 a share offer from Dye and Durham (D&D).

The collapse came after D&D last week cut its offer again to $3.81 (plus a contingent payment) – an offer Link rejected.

The collapse came after 10 months of tortuous negotiations with the Canadian company. The final straw being rulings in the past 10 days by Britain’s Financial Conduct Authority (FCA) over the collapse of a Woodford retail fund in mid-2019 that was administered by Link’s British subsidiary.

FCA said Link could have to pay up to 306 million pounds (around $A510 million) in redress payments and penalties, and then a few days later said in a second announcement that Link was facing another 50 million pounds in new penalties (or $A85 million).

In Friday’s statement Link admitted that, “Under the Scheme Implementation Deed between Link Group and Dye & Durham, the time for satisfaction of the Outstanding Conditions Precedent has expired. There is no expectation that the Outstanding Conditions Precedent for the Transaction will be satisfied. Accordingly, at the Second Court Hearing today, the Court declined to make orders approving the Scheme and dismissed the proceedings.”

Link said it was (naturally) “disappointed to inform shareholders that despite Link Group working diligently over an extended period and using its best efforts, the proposed Scheme with Dye & Durham involving Base Cash Consideration of $4.81 per Link Group share which Link Group shareholders approved in August will not be proceeding.

“Link Group is still considering paying Link Group shareholders a fully franked Special Dividend of $0.08 per Link Group share. Link Group will update the market in respect of its decision on the Special Dividend in due course.”

That is in addition to the 3 cents a share interim paid earlier in the year, making a total payout for the half year of 11 cents a share, up from 10 cents a year ago.

That payment was confirmed on Monday.

Link says it intends to continue to “evaluate alternatives for the business, including an in specie distribution of a minimum of 80% of Link Group’s shareholding in PEXA, in order to maximise value for shareholders.”

Link also reaffirmed the FY23 guidance provided in Link Group’s 2022 results released on August 230.

“Link Group’s FY23 revenue is currently projected to increase by a low single digit percentage, Operating EBITDA is currently projected to be around 8-10% higher than FY22 and Operating EBIT is currently projected to be around 10-12% higher than FY22.”

Link shares closed at $3.05, down nearly 8%. That’s less than half the $6.37 a share IPO price in October, 2015.

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