Spire Healthcare Group Plc (LSE:SPI) has “put itself in play”, in the words of Panmure Liberum, as the private hospital operator begins exploring a sale and other ways to release value from its £1.4 billion property estate.
The board’s patience has worn thin. The shares, at 247p, have gone largely nowhere for years despite steady growth, leaving Spire with a £995 million market value.
Panmure reckons a sale of the entire business could fetch 325p–450p a share, well above its 285p target price.
The broker sets out three scenarios. The cleanest is a straight sale, with possible buyers including Circle, Ramsay and Nuffield.
Competition hurdles would be an issue for the UK groups, while Mediclinic, already on the register with a 30% stake, is an obvious contender, having bid 300p in 2017. Private equity interest is also likely given recent activity in the sector.
Another option is a sale-and-leaseback of Spire’s properties. Panmure calculates that a 100% deal could release £1.4 billion but would burden the operating company with such high rent that it would leave “very little value” for shareholders.
A partial deal would be less onerous and could lift cash flow, but Panmure warns that simply paying out the proceeds would not create value unless the funds are reinvested into growth.
The final lever is the Services division, which generates more than £120 million of revenue and EBITDA of about £10 million. Panmure suggests private equity might value it at £150 million.
But selling would mean abandoning a fast-growing, strategically important arm, so the analysts argue Spire should instead use a modest sale-and-leaseback to reinvest in Services.
“The best route to generating value is to sell the business today,” Panmure concludes, putting 325p as the floor and noting that a price north of 400p could be achievable if competitive tension emerges.
Even so, the broker cautions that Spire has been a bid candidate for years without success.
After a 15% share price rise on Friday, the stock was off 1.4% at 243p on Monday afternoon.