What Happened to the Ramsay Health Care Share Price?
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.
Why Did This Happen to the Ramsay Health Care Share Price?
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.
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What Now For Ramsay Health Care Ltd?
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
