- Bid from Indian group reportedly in works
- Shareholders supportive
- Plans to take controlling stake
Private healthcare provider Spire Healthcare (SPI) jumped 8% after the Economic Times reported that Indian medical group Narayana Hrudayalaya (NH:NSE) is looking to acquire a controlling stake in the FTSE 250 company.
Narayana is led by renowned heart surgeon Devi Shetty, whose senior management team have already held ‘detailed’ talks with institutional shareholders and reportedly received ‘positive’ feedback.
They are expected to meet activist shareholders in the coming weeks to garner support for the plans.
Spire shares have effectively gone sideways since the middle of 2021, consolidating the four-fold increase notched-up from the March 2020 lows.
A BIG PILL TO SWALLOW
At the prior market close, Spire had a market value of £885 million and a total value including net debt or enterprise value of over £2 billion, while Narayana has a market value of £2.4 billion roughly equal to its enterprise value.
Shetty and his family alongside aligned parties own around 64% of Narayana. According to reports, the plan is to raise between £400 million to £500 million in funding from international banks and institutions and make an open offer for 51% of Spire Healthcare.
Dan Coatsworth, investment analyst at AJ Bell, commented: ‘Market chatter suggests Narayana is in talks to buy a controlling stake in Spire, sending shares in the UK stock up 8%.
‘Spire has been a frustrating share to put it mildly, barely changing price since late 2021, which means investors might welcome the opportunity to sell out to Narayana if it’s paying a premium.
‘Australia’s Ramsay Health tabled a £1 billion bid in 2021 but the target’s shareholders voted it down. Spire’s valuation has weakened considerably since mid-2023.’
According to Stockopdedia data, Spire’s one year forward PE (price to earnings) ratio has dropped from 23 times to around 15 times earnings per share over that timeframe.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
