Spire shareholder Fidelity vows to oppose £1bn Ramsay takeover

The biggest institutional investor in Spire Healthcare, the private hospitals group, has vowed to oppose a £1bn takeover bid, arguing that it “materially undervalues” the business.

Sky News can reveal that Fidelity International, which holds a stake of just under 8.7% in Spire, has decided to reject a 240p-a-share offer from Australia’s Ramsay Health Care, which was recommended by the London-listed company’s board last month.

Fidelity’s stance is likely to galvanise other Spire shareholders who believe that the price is inadequate, given an anticipated spike in revenue arising from the coronavirus pandemic.

Alex Wright, portfolio manager, Fidelity Special Situations Fund, said that Ramsay’s bid to create Britain’s biggest private hospitals group “materially undervalues the shares, and Fidelity International will not be accepting the bid at this level”.

“To put this offer in perspective, the board turned down a previous 300p per share takeover approach in 2017 when the stock had recently traded at 350p (circa 20X earning in 2015-2017),” Mr Wright added.

“Spire Healthcare, one of the UK’s largest private hospitals, is well placed in the UK recovery post Covid-19, which should feed into future earnings growth.

“In our opinion, Spire can return back to a 2015-2017 level of earnings over the next three to five years.”

Sky News revealed last month that Ramsay’s bid was facing opposition from some of Spire’s largest investors.

A successful bid would unite Spire’s 39 UK hospitals with Ramsay’s 37 under common ownership, making the combined group bigger than rival BMI Hospitals.

Spire’s board, led by newly appointed chairman Sir Ian Cheshire, sought to justify its recommendation by pointing to a 55.8% premium to its share price on March 5 – the day before Ramsay’s initial approach.

However, several shareholders believe that the company’s freehold property portfolio alone could be worth £1bn.

They are thought to want to push for offers valuing Spire at closer to 400p-a-share – nearly 70% higher than the recommended bid.

Another City source said that the pent-up demand in waiting lists caused by the coronavirus pandemic’s impact on hospital capacity meant that Spire had “five years of earnings growth to look forward to”.

Mediclinic, a South African group which owns 29.9% of Spire, gave its endorsement to the 240p-a-share bid, although one insider said that that stance had been heavily influenced by its need for cash.

Spire’s leading shareholders also include Aberforth, Schroders and Toscafund.

Fidelity’s stance could – if echoed by other large investors – force Ramsay to sweeten its bid.

The row comes at a sensitive time owing to the number of FTSE-250 companies being targeted by private equity and overseas bidders.

In recent weeks, John Laing, the infrastructure group, has agreed to be taken over by KKR, the buyout giant, and healthcare provider Vectura recommended an offer from Carlyle.

Equiniti, Sanne and Elementis, all of which are FTSE-250 constituents, have also attracted bid interest.

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