Ramsay Health Care Limited 

Ramsay Health Care Limited’s (ASX: RHC) 50.9% owned French subsidiary, Ramsay Générale de Santé (RGdS), planned to acquire the Nasdaq Stockholm listed, pan-European healthcare company, Capio AB. Therefore, it launched an unsolicited takeover bid for all the shares of Capio at a price of SEK 48.5 per share, which puts the valuation of Capio’s equity at €661 million (c.A$1,041 million). RGdS planned to acquire through a combination of debt and equity. RGdS had taken an underwritten incremental debt facility with leading financial institutions, and indicated to undertake a rights issue for a planned amount of approximately €510 million. RHC also gave an irrevocable commitment to subscribe for its €257 million pro rata share of the RGdS equity raising, which would have been debt funded. However, the initial offer was rejected by Capio and the market is speculating any superior proposal that may take shape going forward. Capio has delivered total sales of approximately €1.6 billion and EBITDA of €116 million. RGdS expected pre-tax synergies of approximately €20 million, the majority of which expected to be realised within two to three years. In addition, the combined group was expected to be uniquely positioned in the private European healthcare sector, having a geographic footprint spanning six countries with strong underlying growth fundamentals, and expected to further contribute to making RHC a leading global provider of healthcare services.
 
On the other hand, RHC has experienced weaker growth rates in procedural work and inpatient admissions in its Australian operations in recent months as well as delays in the rollout of the Ramsay Pharmacy franchise network. As a result, RHC has lowered its earnings outlook. For 2018, RHC now expects Core EPS growth to be approximately 7% compared to the guidance of 8% to 10% previously provided. Meanwhile, RHC stock has fallen 15.70% in three months as on August 15, 2018  and is trading at a P/E of 23.71x.
 
While the group is going through a rough patch, the investments in new hospitals, expansion or acquisition moves and growing population may help the group offset some of the impact from the challenges. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 55.550 (up 1% on August 16, 2018), ahead of the result due around August 30, 2018.

 
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