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Post Market Wrap | Cash offer for Ramsay Health Care shares lodged by KKR led Consortium

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A $88 cash offer for Ramsay Health Care shares lodged by KKR led Consortium

  • Offer price values Ramsay at A$20.1B and is a 37 percent premium to last traded share price  
  • Ramsay Foundation, a 20 percent shareholder, is supportive of Consortium offer
  • Consortium undertaking due diligence to enable binding offer to be put to shareholders
  • Offer has Board approval, and a subsequent binding offer is likely to receive shareholder support.

Ramsay Health Care Limited (Ramsay or the Company) is Australia’s largest private hospital operator, owning 72 private hospitals. Founded in 1964 by Paul Ramsay, the Company listed on the ASX in 1997 and employs 86,000 people globally, across 10 countries, in over 460 locations. 

Ramsay’s global operations are spread across four regions, including Australia. Ramsay Santé is Europe’s second largest private care provider, operating from over 350 locations that employ 36,000 staff. Ramsay UK has a network of 34 acute hospitals and day procedure centres that employ 7,300 people. This UK presence has been boosted with the strategic acquisition of leading mental healthcare provider, Elysium Healthcare, in December 2021. In Asia, Ramsay employs 4,000 people and operates three hospitals in Indonesia, three hospitals and a nursing college in Malaysia and one day surgery in Hong Kong. 

A$88 cash offer 

A Consortium led by New York based global investment bank Kohlberg Kravis Roberts & Co., (KKR) has offered A$88 a share to buy 100 percent of Ramsay under a Scheme of Arrangement. KKR is a major player in private equity buyouts around the world.

Ramsay was obliged to confirm the offer to the market today, following media speculation about the proposal. The offer, which has the support of Ramsay’s largest shareholder, the Ramsay Foundation, represents a 37 percent premium to the price where Ramsay shares last traded. Ramsay Foundation owns 20 percent of the Company. The offer places a value of A$20.1 billion on Ramsay. Directors have agreed to provide the Consortium with due diligence on a non-exclusive basis to enable a binding proposal to be brought before shareholders.

The Consortium has structured its proposal as Scheme of Arrangement (Scheme). A Scheme requires shareholder and Court approval and may take three months to implement. However, a Scheme provides all parties with certainty in that once approved, it is binding on all shareholders.    

Image: file

Next Step

The A$88 cash offer was expressed to be confidential, and the Consortium has the right to withdraw the proposal if it ceased to be confidential. This is unlikely to occur, because the Consortium has already secured board and key shareholder support at the agreed price.

KKR is a major player in buyouts around the world and through its private equity arm owns French private hospital group, Elsan. Twenty-eight thousand employees and 7,500 doctors service the needs of 2.2 million patients a year at Elsan. Ramsay’s significant European presence appears complementary to Elsan’s well established French business operation. This may partly explain why a Scheme has been proposed by the Consortium, because it can more efficiently respond to any regulatory scrutiny that may arise, given the likely dominance of the merged hospital owner and operator in Europe. The buy-out offer is also certain to attract the attention of the Foreign Investment Review Board here in Australia.    

The proposal has the support of the Ramsay board and the KKR led Consortium has the cash to complete the proposal. Once the necessary regulatory approvals have been secured, a binding proposal can be brought before shareholders and is likely to be approved.    

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

"Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world."

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Money

Boeing CEO to depart with lucrative exit package despite chaos

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Boeing CEO Dave Calhoun is set to step down from his position at the end of the year, walking away with a substantial payout despite challenges faced during his tenure.

Here are the key points:

  • Massive Payout: Despite Boeing’s stock price plummeting by 43% since Calhoun took over as CEO in 2020, he is poised to receive a $24 million payment upon his departure.

  • Additional Compensation: Calhoun holds options that could potentially earn him an additional $45.5 million if his successor manages to boost Boeing’s share price by 37%.

  • Comparative Compensation: Calhoun’s compensation during his tenure exceeds that of CEOs in similar industries, despite Boeing’s stock underperforming in comparison.

Boeing CEO Dave Calhoun’s impending departure at the end of the year has sparked controversy as he stands to walk away with a substantial payout, despite the company’s tumultuous journey under his leadership.

READ MORE: Boeing CEO to step down

Despite inheriting a company reeling from the aftermath of two deadly 737 Max crashes, Calhoun’s tenure has been marred by further setbacks, including the recent Alaska Airlines door blowout incident that further tarnished Boeing’s reputation.

Boeing offers CEO $5.3 million incentive to stay through recovery …

With Boeing’s stock price plummeting by 43% during Calhoun’s time at the helm, questions arise about the correlation between executive compensation and company performance, especially in the face of such significant challenges.

‘Raised eyebrows’

Calhoun’s lucrative exit package, valued at $24 million, has raised eyebrows among shareholders and industry observers alike.

Additionally, the potential for Calhoun to earn an additional $45.5 million based on the future performance of Boeing’s shares has intensified scrutiny over executive compensation practices.

This sizable payout contrasts starkly with Boeing’s stock performance, which has significantly underperformed compared to both industry peers and broader market indices, highlighting the dissonance between executive rewards and shareholder value creation.

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Money

It’s been a record year for CEO compensation

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In 2023, Broadcom’s CEO Hock Tan was granted a stock award worth $161 million, propelling him into the realm of highest-paid CEOs.

However, as the company’s share price surged, the value of Tan’s award skyrocketed to approximately $1.3 billion, outpacing even the shareholders’ annual returns.

Tan’s compensation reflects a broader trend among top executives in the tech sector, where awards of restricted stock and stock options surged in value alongside company share prices.

Notably, CEOs like Charles Robbins of Cisco Systems and Shantanu Narayen of Adobe also saw substantial increases in their compensation, doubling in some cases.

The disclosure of such equity growth in executive compensation is a new requirement by the Securities and Exchange Commission (SEC), providing shareholders with insights into the changing value of executives’ awards throughout the year.

CEO pay is on the rise.

New heights

Overall, CEO pay at major S&P 500 companies reached new heights in 2023, rebounding from slower growth in the previous year. The median pay for these CEOs rose to $15.6 million, up from $14.1 million in 2022, reflecting a surge in equity awards.

Broadcom clarified that Tan’s stock award is designed to span five years, with no plans for additional equity grants or cash bonuses during that period.

Tan’s compensation, which amounts to approximately $33 million annually over five years, is contingent upon his continued tenure and specific share price targets.

While the initial valuation of Tan’s restricted shares stood at $160.5 million, the surge in Broadcom’s share price prompted the company to reassess the likelihood of meeting vesting conditions.

This reassessment suggests that Tan may not receive all the shares initially granted.

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Money

Market forecast: weather whirlwinds influencing investments

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Prime conditions for commodity investments arise from global weather shifts, geological tensions, and rising interest rates.

With global weather patterns causing disruptions in traditional supply chains, coupled with geopolitical tensions over natural resource access, and the anticipation of higher interest rates impacting financial markets, the conditions for commodity investments have reached exceptional levels.

Amidst this backdrop, Farrer Capital has emerged as a standout player, leveraging its unique ‘blue ocean’ approach to capitalize on price dislocations and scarce competition in the market.

Mark Wyld from MW Wealth joins the show to share his insights on the inclement weather impacting the market.

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