An in specie distribution by Ramsay Health Care of its 52.8% stake in Ramsay Santé is emerging as the most likely outcome of Ramsay’s strategic review, said shareholders and sell-side analysts. Sante has a market cap of EUR 976m (AUD 1.7bn).

Ramsay disclosed at its AGM yesterday (Tuesday) that its strategic review of its Sante business is complete with an update due by its February half year results.

The announcement has been well received by shareholders and analysts, leading to a rise in Ramsay’s share price from a close of AUD 31.27 on 21 November to close at AUD 37.32c Wednesday.

Two shareholders said that an in specie distribution or exit of its stake are Ramsay’s main options, with the former the most likely. The first shareholder added that a third, less likely option, is a stake sale. He doubted any shareholder would have an issue with an in specie distribution given Sante has been an albatross around Ramsay’s neck. “Holders have said just get rid of it. If they do manage to sell it and get cash proceeds, then wow and (the) stock rips.”

Morgan Stanley estimates the market value of Ramsay’s stake in Ramsay Santé at around AUD 4 per share. Based on the more favourable financial profile of the Wholly Owned Funding Group (WOFG, Ramsay’s Australian and UK operations) and scope for a simplified business structure, it sees potential for a re-rating of the WOFG through an in specie distribution of RHC’s holding in Ramsay Santé.

For its part, Citi believes expectations that a sale can be achieved are low. “Various permutations of a scenario involving an in specie distribution, including ones where RHC retains a stake for later sell down, would likely involve shareholder approval, but given negative views about the current structure, we do not see this being a big obstacle.”

Bank of America analysts argue that given Sante’s challenges and lack of buyer interest “we suspect Ramsay will lean towards an in specie distribution.”

Meanwhile, Ramsay chair David Thodey told the AGM that the group is actively involved in assessing opportunities around Healthscope, being mindful of spending capital wisely and potential competition complications. Chief executive Natalie Davis added that buying assets in the right catchment for Ramsay is important.

In February, Ramsay said Goldman Sachs had been appointed to further explore and advise on strategic options associated with Ramsay’s 52.8% shareholding in French hospital operator Ramsay Santé.

In April 2024, this news service reported that shareholders were pressuring Ramsay to unlock value and take strategic action on Santé.

Ramsay declined to comment.