KKR has pulled its $88 a share all-cash offer Ramsay Health...

KKR has pulled its $88 a share all-cash offer Ramsay Health Care, and told the company it would like to discuss its alternate proposal in more detail.

It is understood KKR sent a letter to Ramsay’s board on Friday morning, telling them it was no longer offering $88 a share on a whole-of-company basis per its April offer, which would have valued Ramsay at $28 billion including debt.
KKR, having been unable to gain access to due diligence at Ramsay’s operations in France, wants to acquire Ramsay’s Australian operations and spin the French arm back to Ramsay investors.

Ramsay went into a trading halt on Friday morning, to consider its position. It comes after a day Ramsay, on Thursday evening, broke its four-month silence.

Ramsay’s board is understood to be keen to engage with KKR. However, it is firmly of the view that the private equity firm and its syndicate should stick to all-cash offer that got them into due diligence in the first place, or improve the terms of its alternate proposal.

KKR’s alternate proposal
Ramsay disclosed the terms of KKR’s alternative proposal on Thursday night, as the hospitals group and its French business Ramsay Sante were preparing to release earnings updates to investors.
KKR’s alternate proposal would see all Ramsay shareholders paid $78.20 cash for Ramsay’s Australian operations, before getting either cash or scrip for Sante stake.

Ramsay’s small parcel holders - those with 5000 shares or less, which is by far the majority of the group’s investors by number - would get $88 all cash, while those with more than 5000 shares would receive stock in Sante.
The headline price on the cash/scrip offer - for those with more than 5000 shares - was $84.93 as of Thursday night, which was not high enough for Ramsay’s board.

While both sides want to keep talking, having gone down the garden path for months, a pretty clear and fundamental gap in their expectations has emerged. Ramsay’s board is clinging to the $88 a share all cash structure that got KKR into diligence in the first place.

KKR, having been unable to get diligence at Sante, has moved on and withdrawn that offer. It wants to talk about the alternate proposal.

Ramsay’s disclosure on Thursday night, and KKR’s letter on Friday morning, should bring to a head a situation that has been brewing for the past five months.

Sante, despite representing only about one-tenth of Ramsay’s value, was always going to be the stumbling block. KKR owns a stake in Elsan, the other big French hospitals group, while Sante has some strong-minded directors who were never going to let the PE in for due diligence without some assurances. KKR would’ve known it.
Ramsay, which has representatives on Sante’s board, definitely knew it.

The question is why it’s taken five months for it to finally emerge as the battleground, and why both sides have let it go this long without a solution that they can both live by.
Hedge funds will be hoping KKR can return with a higher cash component in the alternate proposal, which may be able to break the stalemate and get Ramsay’s approval.

UBS and Goldman Sachs are advising Ramsay, while KKR’s advisers are Barrenjoey Capital Partners and Credit Suisse