Takeover talks between Ramsay Health Care and private equity giant KKR have fallen over after KKR and a consortium of investors told the private hospital operator that would have to reset its valuation expectations if it wanted to continue discussions.

Ramsay entered a trading halt on Tuesday morning before releasing an update to investors revealing that the KKR said there was no room to move to increase its offer for the company. Shares dropped after resuming trading and were 10.8 per cent lower to $62.60 just before 12.30pm AEST.

The correspondence noted that in light of Ramsay’s financial results, the suitors were not able to increase their offer beyond its current bid, but suggested that if Ramsay reset its expectations around its valuation, it could pick discussions back up.

KKR and its partners had initially lobbed an $88-a-share bid for the company, valuing it at more than $20 billion, but this changed over the months, with the suitors unable to gain access to Ramsay’s French operations, Ramsay Santé, for due diligence.

In late August the bidders were looking at an alternative bid which would see smaller shareholders still get $88 per share but those with larger stakes receiving $78.20 plus 0.22 shares in the French business.

“The latest correspondence received from the Consortium refers to its review of Ramsay’s FY22 result announcement and notes that it is not in a position to improve the terms of the Alternative Proposal,” the Ramsay told investors on Tuesday.

“Whilst the Consortium recognises that further engagement and access to further due diligence may provide some positive visibility, the information provided in the FY22 results implies that there is meaningful downward pressure on the valuation proposed under the Alternative Proposal.”

Ramsay shares surged in April when news of the KKR-led consortium’s bid was announced. The global private equity giant had been watching Ramsay for some time and had been considering a tilt at the business since the start of 2021.