KKR-led $13 billion buyout of Australia’s Ramsay Health collapses

By Byron Kaye and Harish Sridharan

(Reuters) -A KKR & Co Inc led group has withdrawn a A$20 billion ($13 billion) bid for Australian hospital operator Ramsay Health Care after talks hit a stalemate, killing Australia’s biggest deal of the year and sending the target’s shares tumbling.

The decision announced by both sides on Monday draws a line under a takeover saga that has been running since April, and underscores the volatility of dealmaking at a time of heightened disruption of capital markets and operating logistics.

The would-be buyers had proposed paying A$88 per share in cash for the company in April, but cut the cash component in August after Ramsay reported a worse than expected 39% slump in annual profit, blaming COVID-19-related staffing problems.

Central banks around the world meanwhile had jacked up interest rates – and borrowing costs – amid raging inflation.

Then last month Ramsay said the KKR-led group had notified it that it would not improve on what Ramsay considered a “meaningfully inferior” offer, due to the target company’s weak business performance.

Sources have previously told Reuters that KKR had not been able to gain access to Ramsay Sante’s accounts to carry out due diligence, and that this was one of the reasons a revised bid was made.

Ramsay said in a share market filing on Monday that it had continued to engage with the potential buyers but “it has become apparent that the consortium is unable to provide a new proposal at this time”.

A spokesperson for the KKR-led consortium told Reuters in a statement: “Following recent engagement with the Ramsay Board, we have decided to mutually terminate discussions regarding a potential change of control transaction”.

Shares of Ramsay fell as much as 7% in morning trading, against a 2% decline on the broader market, as any remaining hopes a deal might eventuate evaporated. The stock was last trading at A$57.64, one-third below the initial indicative buyout price which Ramsay’s biggest shareholder had supported.

On Friday, another of Australia’s biggest planned deals of the year, a purchase of legal software company Link Administration Holdings by Canadian rival Dye & Durham, collapsed due to a regulatory probe of the target’s British unit.

The deal, which would have been Australia’s biggest this year, would have given the country’s much slowed transaction activities a boost.

Total deal value in Australia had fallen nearly 60% year-on-year by mid-September.

($1 = 1.5328 Australian dollars)

(Reporting by Byron Kaye in Sydney, Kane Wu in Hong Kong and Harish Sridharan in Bengaluru; Editing by Stephen Coates and Jan Harvey)