HBI Deals+Insights / M&A/IPOs

Ramsay Sante’s Capio integration and finances paint a puzzling picture

It’s been nearly two years since Australian-owned French hospital group Ramsay Sante completed the acquisition of Nordic-French acute care operator Capio. Contacts give HBI their assessment of how the integration is going and we take a deeper look at the combined group’s financials.

In April this year, Ramsay Sante CEO Pascal Roche told analysts: “We publicly stated that we were aiming at €20 million worth of synergies (from the Capio deal). I think that it’s fair to say and reiterate the fact that we are more than confident that this amount will be exceeded by quite a significant amount. And I’m happy to say that most of those €20 million are already secured.” 

As our story at the time showed, €20m is a relatively low amount of cost-savings for a deal which created a group with €3.8bn of revenues in five countries (it has since offloaded the German business in two tranches). But, as a shareholder in Ramsay Sante – 51% owned by AUX-listed Ramsay Health Care – pointed out to HBI, that doesn’t necessarily matter: “This acquisition has been executed in order to dilute the weight of France, as Ramsay Sante’s CEO has been explaining in the last seven years that French tariffs were on a painful downward trend.”

And the group recently told HBI that it was importing Capio’s digi-physical primary care model into France with five clinics opening in Q1 next year. It has negotiated capitated payment models with France’s statutory insurer, mirroring Capio’s reimbursement system in Sweden.

Nonetheless, the success of its integration of the Nordic and French segments has been called into question by multiple sources. One tells HBI: “My impression is that there is no strong integration between the Nordics and France. It’s a looser relationship which is mainly financial. I don’t see deep integration in medical areas, real knowledge-sharing, or procurement or brand synergies.

“The reason is clear. The reimbursement system and relationships with doctors are completely different in both regions. In Sweden, they work closely with primary care whereas in France they are only in secondary/hospital care. In an integration, you typically go for the low-hanging fruits like reducing double functions, in finance for example, but you can’t cut the financial staff in Sweden because you need their understanding of the local market.” 

Well-respected Swedish business outlet Dagens Industri said in December last year that Ramsay Sante was ‘struggling’ with the Capio integration while a columnist for the Australian Financial Review (AFR) said in May this year it was very hard to assess the performance of Capio since it was acquired.

For that, you have to look at Ramsay Sante’s last financial report which covers the second half of 2019, published February 26. Revenue from Capio, fully consolidated during the period, was €805.8m versus €247.2m in the second half of 2018 when it was only consolidated from November 7. A shrewd financial brain may notice that the fully consolidated period exhibits a lower revenue per day for Capio: €4.3m (€805.8/184 days of consolidation) versus €4.5m (€247.2m/55 days of consolidation). Devaluation of the SEK versus the Euro may explain the difference.

But currency or reporting technicalities could not explain the gigantic revenue falls implied in recent presentations. Euro figures for Ramsay-Capio combined in this one from the group’s Medical Innovation Director in August 2020 are substantially lower than those in one from March 2019: 29% down in Sweden, 35% down in Norway, 25% down in Denmark. Falls in France and Germany may be explained by divestments in both countries while Italy is flat.

HBI emailed Ramsay Sante earlier this week for clarity around the above figures. CFO and head of Investor Relations Arnaud Jeudy was not available for comment when reached while another representative has yet to respond. Ramsay Sante’s July 2018-June 2019 report says its pro-forma (Capio consolidated for 12 months) was €3,953m while parent company Ramsay Health Care’s more recent annual report for July 2019-June 2020 reports €3.9bn for ‘Continental Europe’ implying none or negative growth, though obviously, that includes the COVID-19 impact. It adds: “Ramsay Santé accounts will not be issued until October 2020 and these estimates may be updated and produce a different outcome to the management accounts.”

The same month as the AFR’s article, a debate in Sweden showed the political difficulties in integrating the two geographies. Capio’s country head for Sweden, Britta Wallgren, wrote an article titled “No, Swedish care is not controlled from Australia” in response to an accusation by an academic that foreign corporate interests from Australia were controlling public care in Sweden. John Lapidus, researcher at Gothenburg university, pointed to Capio’s renegotiation of an outsourcing contract at Lundby hospital which reports say will allow it to more easily treat private-paying patients alongside publicly-funded ones. This is closer to Ramsay’s model in Australia where it strictly segments between customer groups, though it is not clear to what extent this move was pushed by the parent company.

We would welcome your thoughts on this story. Email your views to Cameron Murray or call 0207 183 3779.