Ramsay Health Care Generates $630M Gain On Malaysian Hospital Sale

About Ramsay

Ramsay Health Care Limited (Ramsay or the Group) is Australia’s largest private hospital operator, owning 72 private hospitals. Founded in 1964 by Paul Ramsay, the Company first listed on the ASX in 1987, before being privatised in 1992. The Group was subsequently again listed on the ASX in 1997 and today employs 86000 people globally, across 10 countries, in over 490 locations. The Group specialises in surgery, rehabilitation, and psychiatric care.

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 4000 people and operates three hospitals in Indonesia, three hospitals and a nursing college in Malaysia and one day surgery in Hong Kong.

Ramsay’s largest shareholder is the Paul Ramsay Foundation.

Ramsay’s global operations are spread across four regions, including Australia. Ramsay Santé (52.5 percent equity stake) 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 4000 people in a 50 percent joint venture and operates three hospitals in Indonesia, three hospitals and a nursing college in Malaysia and one day surgery in Hong Kong.

Sale of Malaysian healthcare business generates A$630M profit.

Ramsay Health Care and its 50 percent joint venture partner, Sime Darby, have announced the sale of the Ramsay Sime Darby Health Care joint venture hospital unit in Malaysia for A$2 billion. The sale is subject to Australia’s Foreign Investment Review Board approval and is expected to settle by March 2024.

Expected net profit after tax on the sale of its share of the joint venture is approximately A$630 million. The gain on sale will be reported in the FY2024 full year results through the ‘discontinued operations line’ as is does not form part of operating profit and will not be considered in determining the full year dividend. Ramsay’s share of the sale proceeds will be applied to Group debt and the Group leverage ratio is estimated to fall below 2.5 times Group EBITDA at June 2024. This should see annualised interest cost savings of about $55 million.     

The sale to Columbia Asia, of which global private equity group TPG Inc is a major shareholder, appears to have been anticipated by the market with Ramsay shares up 6 percent in the preceding week. The sales process has been a lengthy one, having stalled several times. Ramsay’s joint venture partner in the hospitals business, Sime Darby, is a Malaysian-based industrial company and hospitals are non-core to its motors and industrial businesses.

Digital and data transformation

Ramsay is investing up to $98 million in the 2024 and 2025 financial years to digitise its Clinical Information System. Healthcare is one of the least digitally mature industries and this digitisation strategy seeks to build an integrated Digital Front Door as a single-entry point into the Ramsay Ecosystem for its patients, clinicians, and the Ramsay team. It will provide a centralised view on patient’s records, medicine prescriptions and history of care interactions across the Ramsay care network. This digitally enabled operating environment, which includes Artificial Intelligence applications, is anticipated to generate net positive EBITDA benefits from FY2028.  

 The program is underpinned by a robust cyber framework to limit the potential for any external disruption threat.   

On a separate front, there is chatter of Ramsay disposing of its significant private care provider unit in Europe, Ramsay Sante, in which Ramsay holds a 52.5 percent stake. The shares could be distributed to Ramsay shareholders by way of an in-specie distribution although the preferred option would most likely be to flush out a cash buyer for Ramsay’s controlling stake in the European based hospital operator.

The digital and data transformation program reflects a fundamental shift in healthcare service delivery, providing financial and non-financial benefits to the hospital Group that are likely to contribute to consistent shareholder returns at least in the medium term.