Shares in hospital operator Ramsay Health Care Ltd [ASX:RHC] rallied by nearly 4% today, defying broader market anxiety leading into reporting season. Today’s move has propelled Ramsay’s shares to a gain of 9% in the year to date, including dividends.
For the past few weeks the market has struggled to digest the implications of Ramsay’s intention to buy an 83% stake in its French counterpart, Générale de Santé (GDS).
It’s a huge deal. There had been some chatter in the market that Ramsay would pay around $1.2 billion for that majority stake. That would amplify the importance of paying the right price.
Yesterday Ramsay announced that it had agreed to pay $627 million to secure a controlling interest of 57% in GDS. With Ramsay’s joint venture partner Crédit Agricole Assurances acquiring the balance of the 83% stake, the market now seems relieved that the deal has been done at a sensible price.
Removing that overhang of transactional uncertainty got Ramsay’s share price moving today.
Free Reports:
Ramsay shareholders should cheer this news. For the price Ramsay paid, GDS should make an immediate positive impact on RHC’s earnings per share.
This acquisition positions Ramsay as a large player in Europe at a time when a number of European governments are seeking to encourage private healthcare. There’s every chance that GDS will give Ramsay the growth its shareholders demand…but I think the real growth will come when Ramsay finds a way into the Chinese healthcare market.
Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator