Ramsay Healthcare (RHC) sets its sights on Digital Revolution
Stock
Ramsay Healthcare $54.99 as at 16/7/18
Event
It’s been an eventful few weeks for Australia’s largest hospital operator with the ink just drying on a disappointing earnings downgrade while over the weekend Ramsay's French subsidiary, Ramsay Générale de Santé, which RHC owns 50.9% of lobbed a $1 billion bid for the Stockholm-listed European rival Capio. The bid has been re-bucked by Capio in the first instance however we doubt this will be the end of it. Capio shares are now trading above the 48.5 Swedish Crown bid price which implies Ramsay have simply fired the first shot in a potential bidding war.
Reading Credit Suisse research today on the deal, they reckon that RHC will need to sweeten the price substantially to get it across the line, and we tend to agree. Capio is a great operator particularly in the use of technology to improve better health outcomes across its network, something that would no doubt appeal to RHC, allowing them to roll out ‘Capio smarts’ across the broader RHC business.
Ramsay Healthcare (RHC) Chart
Market Matters Take/Outlook
We added Ramsay to our High Conviction Active Portfolio into recent weakness and we remain comfortable with the position. While an overheated bidding war is not ideal in the short term for the RHC share price, we think the deal makes sense in the longer term assuming they maintain disciplined in the negotiation process.
