Australia's Ramsay says KKR-led group canned $15 billion all-cash bid, rejects alternative

© Reuters. FILE PHOTO: Trading information for KKR & Co is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 23, 2018. REUTERS/Brendan McDermid

By Scott Murdoch and Indranil Sarkar

(Reuters) -Ramsay Health Care Ltd said on Friday a group led by private equity firm KKR & Co (NYSE:KKR) Inc has withdrawn a near $15 billion all-cash buyout offer, leaving on the table a cash-and-stock bid that the Australian hospital operator rejected.

Under the cash-and-stock offer disclosed on Thursday, Ramsay shareholders would be entitled to A$88 per share - as in the all-cash proposal - but only for the first 5,000 shares.

For investors with larger stakes, the offer would split into A$78.20 per share in Ramsay and 0.22 share in French subsidiary Ramsay Generale de Sante SA. The new offer is worth about $14.5 billion plus the value of Ramsay's franking credits.

Ramsay rejected the alternative as "meaningfully inferior". On Friday, it said KKR had informed it the all-cash offer had been withdrawn, hitting its share price which closed down 3.32%. The stock is off 16.4% since KKR made its first offer in April.

It said it would not negotiate regarding the alternative proposal but was "prepared to engage with the Consortium to determine whether it can put forward an improved binding proposal that is capable of recommendation by the Ramsay Board."

Ramsay operates healthcare facilities in over 530 locations across 10 countries, including over 70 private hospitals and day surgery units in Australia.

The consortium decided to withdraw its cash offer as it could not carry out due diligence on Ramsay Sante, said two people with direct knowledge of the matter, declining to be identified as the information was private.

The alternative proposal was made to Ramsay's board in mid-June, one of the people said.

Ramsay did not respond to a request for comment on when the proposal was received. KKR declined to comment.

"The alternative offer has a lower implied value, has been unceremoniously rejected, despite Ramsay announcing poor full-year numbers," said analyst David Blennerhassett at Ballingal Investment Advisors who publishes on Smartkarma.

"This looks like a dead deal for now."

Ramsay on Friday reported full-year net profit of A$274 million, nearly 40% less than the year earlier.

The KKR-led consortium, whose members include Australian pension fund HESTA and the Abu Dhabi Investment Authority (ADIA), has made little progress since the first bid in April.

The alternative offer would give the consortium 15% of Paris-based Ramsay Sante, of which Ramsay currently owns 52.8%. Ramsay shareholders would retain the balance of that stake. KKR already owns French healthcare group Elsan.

Had it been successful, the cash offer would rank as the biggest private equity-backed buyout of an Australian company, Refinitiv data showed.

($1 = 1.4362 Australian dollars)