The Ramsay Health Care Limited (ASX: RHC) share price is on the move on Monday morning.
In early trade, the private healthcare operator's shares are down
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Why is the Ramsay share price falling?
The Ramsay share price is falling today despite announcing a major acquisition in the UK.
According to the release, Ramsay has signed an agreement to acquire UK based mental healthcare provider Elysium Healthcare for an enterprise value of 775 million pounds (A$1.4 billion) from private equity firm BC Partners.
The release notes that Elysium is a leading independent operator of long-term medium and low secure hospitals and complex care homes for individuals with mental health conditions and has a strong partnership with the UK's National Health Service (NHS).
It offers Ramsay a platform for growth through full utilisation of recently developed capacity, and delivering on its development pipeline, combined with potential bolt-on opportunities.
Positively, management expects the transaction to deliver mid-single digit earnings per share accretion in FY 2023. It also highlights that the deal meets Ramsay's internal return targets, including a post-tax cash ROIC target of greater than 10% by year five and a post-tax IRR of greater than 10%.
The transaction price of A$1.4 billion represents an FY 2021 EV/EBITDA multiple of 13.5x. Judging by the performance of the Ramsay share price today, some investors may believe Ramsay is paying too much. The deal will be funded from Ramsay's existing debt facilities.
Ramsay's Managing Director and CEO Craig McNally commented: "This is an excellent opportunity for Ramsay to expand its successful health care services platform in the UK through the acquisition of an established and reputable business, with a strong track record of growth and a robust pipeline of development opportunities. It will build on the Ramsay brand and quality reputation with doctors, payors and patients in the UK market."
Huge market opportunity
Mr McNally notes that the acquisition opens up the company to a huge market opportunity in the UK.
He explained: "The acquisition of Elysium will expand Ramsay's patient pathways into the £15bn UK mental health market at a time when more and more people are seeking support for mental health, learning difficulties and neurological issues. It will provide opportunities to leverage the expertise of Elysium and Ramsay's existing mental health facilities and clinicians in Australia, France, and Sweden to drive improved patient outcomes across our mental health activities globally."
"Ramsay and Elysium share a strong commitment to clinical excellence, high-quality care and patient safety, with a matching focus on caring for our people and partners. We look forward to strengthening our important partnership with the NHS," the CEO concluded.
