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Ramsay Health Care establishes health care joint venture in Asia

Ramsay Health Care Limited (“Ramsay”) and Sime Darby Berhad have today entered into a joint venture to expand their healthcare businesses in Southeast Asia initially and eventually throughout the whole region.

Ramsay Health Care owns 35 hospitals in England and is one of the largest providers of independent hospital services in the UK.

The deal, subject to regulatory approvals, will combine all Sime Darby’s portfolio of healthcare assets in Malaysia with Ramsay’s three hospitals in Indonesia, under a new joint venture company.  This new company (to be known as “Ramsay Sime Darby Health Care”) will be equally owned by Ramsay and Sime Darby.

Ramsay operates two hospitals in Jakarta, namely; RS Premier Jatinegara and RS Premier Bintaro, and one in Surabaya: RS Premier Surabaya. 

Sime Darby has three hospitals in Malaysia, namely Sime Darby Medical Centre Subang Jaya, Sime Darby Medical Centre Ara Damansara and Sime Darby Medical Centre Park City.  It also operates a nursing and health sciences college. 

Both Sime Darby Medical Centre Ara Damansara and Sime Darby Medical Centre Park City opened in 2012 and are expected to be key growth drivers for the joint venture.

The joint venture marks Ramsay’s first major step into Asia since acquiring its Indonesian hospitals in 2005 and Sime Darby Healthcare’s first expansion outside of Malaysia.  The aim of the joint venture will be to build a quality portfolio of hospitals throughout Asia.

Ramsay Health Care’s Managing Director Christopher Rex said the joint venture with Sime Darby would provide a solid platform for expansion and further acquisitions in the Asian health care sector.

“We have been cognisant for some time of the attractive market dynamics in Asia with a burgeoning middle class and an ageing population, and have been looking for the right organisation to partner with,” Mr Rex said. 

“This deal with Sime Darby presents a significant opportunity for Ramsay to expand its quality portfolio of hospitals in Asia and apply its proven healthcare management expertise, with a company that has extensive experience in the Asian marketplace.

“Since 2005, Ramsay Health Care has significantly expanded its global hospital portfolio and this joint venture is an important step in our broader strategy of becoming a major hospital operator.”

Sime Darby’s President and Group Chief Executive Dato’ Mohd Bakke Salleh said the joint venture was in line with the group’s first five year strategic blueprint to grow and strengthen its existing businesses.

“There is tremendous potential in the healthcare industry and we do not want to miss this opportunity.  ASEAN alone has 600 million people with a rising middle class that will demand quality healthcare.

“Having Ramsay, a major global hospital operator, as a partner, will help us spur some of the expansion of our healthcare services into new markets.  Both companies have the same goals of creating a major healthcare presence in Asia,” said Dato’ Bakke.

Sime Darby Healthcare reported a profit before interest and tax of RM[1]26 million on revenue of RM358 million for the year ended 30 June 2012.

Ramsay Indonesia health care division recorded a profit before interest and tax of IDR[2] 61.9 billion on revenue of IDR 603.6 billion for the year ended 30 June 2012.

Ramsay will acquire its 50% equity ownership in the joint venture through the contribution of its Indonesian assets and cash payments totalling approximately A$120 million.

The cash payments represents a ‘true–up’ for both the differential in earnings and the contribution of Sime Darby’s new hospitals that opened in 2012. The cash payments will be paid over a three year period and funded through Ramsay’s existing Australian debt facility.

On current projections the transaction is expected to be EPS neutral for Ramsay in FY14 and accretive in FY15.

Ramsay was advised by Citi on the transaction.

The deal is expected to be completed on or before 1 July 2013, subject to obtaining the requisite regulatory approvals.

[1] RM = Malaysian Ringgit

[2] IDR = Indonesian Rupiah

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