The Australian private hospital chain Ramsay has increased its offer to buy the UK company Spire Healthcare.
The takeover will mean Ramsay will merge Spire’s 47 hospitals with Ramsay’s 40 UK facilities, and become the UK’s leading private hospital group.
Ramsay joins other private providers who aim to benefit from a surge in their business due to long NHS waiting lists.
If the merger goes ahead Ramsay will overtake the recently merged Circle/BMI group, which had become the UK’s largest.
The new offer of 250p per share values the company at about £1.4 bn; the previous offer in May this year was 240p per share valuing the company at about £1 bn. Spire’s board has recommended that this offer be accepted.
Investors in Spire, including Fidelity International and Toscafund Asset Management, objected to the first offer in May saying it did not value the company high enough. Toscafund, which owns about 5% of Spire, has also rejected this latest higher offer once again saying it does not value the company high enough. Toscafund and other investors believe that Spire is well placed to benefit from removal of covid restrictions, which they expect will lead to a wave of demand for elective surgery. The deal must be approved by 75% of voting shareholders for it to go ahead. The Spire board has said there have been no other approaches.
Pre-pandemic, Ramsay has been heavily dependent on income from NHS contracts, at around 80% of its annual income in the UK, whereas Spire had derived around 30% of its income from the NHS. Outside of the UK Ramsay operates in 11 countries, but its primary base is its home market of Australia, where it is the largest operator and has over 200 facilities.
The UK private healthcare sector took a major hit in 2020 as the Covid-19 pandemic began but it was saved by the UK government which paid to take over the vast majority of its facilities for use by the NHS, in exchange for paying all the companies’ costs, including debt and interest.
Now investors and commentators think private healthcare is expected to benefit from increased demand due to the ever-increasing NHS waiting lists. High levels of income are expected from contracts with the NHS and from people paying directly. Over 90 private operators, including Spire Healthcare, have signed up to a 4 year deal with NHS England that began in March 2021 worth in total around £10 bn. Unlike the previous deal, the new deal will pay them based on work carried out.
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