August 22, 2018 / 3:27 PM / 10 months ago

Ramsay sounds out Capio investors as it ponders raising bid -source

STOCKHOLM/LONDON, Aug 22 (Reuters) - The French unit of Australian hospital group Ramsay Health Care has approached investors of Sweden’s Capio as it considers bumping up its 661 million Swedish crown ($756 million) bid for the hospital chain, a source close to Ramsay told Reuters.

Ramsay Generale de Sante will only submit a revised bid for Capio if gets enough backing from Capio shareholders, and plans to make a final decision by early September, the source said.

A Capio spokesman said the company was not aware of Ramsay communicating with the company’s shareholders regarding the bid, launched last month and immediately dismissed by the target as undervaluing its business.

Capio shares were trading up 3.8 percent at 54.4 crowns by 1500 GMT on Wednesday, well above the offer price of 48.50 crowns per share, suggesting investors expect a higher offer.

A spokeswoman for Ramsay declined to comment beyond saying the original offer still stood.

Capio’s board, which has said it plans to generate shareholder value by focusing operations on its core Nordic markets, on Tuesday said it plans to sell its French business in a deal worth up to 455 million euros.

Yet Ramsay is against a breakup of the company and would only buy Capio if it could control its operations across Sweden, Norway, France, Germany and Britain, the source said.

The Capio spokesman said the group had talked to its own investors and had concluded that there was good support for its plans to exit non-core markets and focus on the Nordics.

Four of Capio’s top 10 investors holding a total of 25.59 percent of its stock have repeatedly said they prefer the board’s current strategy to Ramsay’s initial bid, which they say is too low.

The investors include Swedbank Robur, R12 Kapital, Nordea Fund and Zeres Capital, the latter having earlier this year halved its stake in Capio. When contacted by Reuters, none would say what the fair value of a bid for Capio would be.

Analysts have a mean target price of 51.22 crowns on the stock, which trades at a 12-month forward multiple of 14.5 times earnings according to Thomson Reuters data.

One hedge fund involved in Capio, which declined to be named, said Ramsay would need to raise its bid to between 55 and 60 crowns per share. “The initial bid seems to clearly undervalue the business,” said the London-based manager.

Capio is looking to concentrate on the Nordic markets where it sees potential to consolidate the sector and benefit from a move towards digitalisation. Last month it reported second-quarter core profit below estimates, hit by a poor performance in its German business. ($1 = 9.1511 Swedish crowns) ($1 = 0.8744 euros) (Reporting by Esha Vaish in Stockholm and Maiya Keidan in London Editing by David Holmes)

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