LONDON, July 20 (Reuters Breakingviews) - The UK’s hospital M&A revolt leaves a sickly prognosis. Investors blocked a 1 billion pound takeover of private operator Spire Healthcare (SPI.L) by Australia’s Ramsay Health Care (RHC.AX). The coup leaves Spire still plagued by coronavirus challenges, and likely struggling to live up to its shareholders’ expectations. British fund managers’ campaign to block supposedly cheap takeovers has ratcheted up a gear. Shareholders like Allianz Global Investors have forced bidders to pay higher prices, as seen in Clayton, Dubilier & Rice’s acquisition of UDG Healthcare (UDG.L). Toscafund Asset Management went a step further on Monday, persuading investors to vote against a 250 pence a share offer for Spire. It was a narrow call: some 70% of shareholders backed the deal at a vote, short of the 75% threshold needed. Toscafund Chief Executive Martin Hughes has a healthy view of Spire’s future. The private healthcare provider specialises in elective surgeries which were cancelled during the pandemic. That backlog of hip and knee replacement surgeries should lead to plenty of business for private operators. Hughes has also suggested Spire could crank up its share price to 400 pence if it sells and leases back its hospitals, which have a freehold value of over 1 billion pounds. On Tuesday, Spire shares were trading at 215 pence. That looks a stretch. Although hospital waiting lists have soared to 10 million, up from 4 million before the pandemic, the rapidly spreading Delta variant may mean that even more surgeries are now postponed. Once infections come down, the budget-constrained government will be even more incentivised to cut costs and farm out less business to expensive private operators like Spire. Analysts are currently pencilling in earnings per share of 10.4 pence by 2024, according to Refinitiv, which implies investors would need to value the business on nearly 24 times those earnings for it to be valued at Ramsay’s 250 pence per share offer. Spire’s average multiple over the last five years before the pandemic is 17, Refinitiv data shows. This uncertain prognosis suggests Spire Chief Executive Justin Ash should prepare for more agitation. He may come under pressure if he fails to live up to shareholders’ raised expectations, or resists a sale and leaseback, which would leave Spire loaded up with debt. And, if Ash disappoints, another bidder could emerge. Shareholders have flexed their muscles but living with the victory may be tricky. Follow @aimeedonnellan on Twitter CONTEXT NEWS - Shareholders of Spire Healthcare on July 19 rejected a 1.04 billion pound takeover offer from Australia-listed rival Ramsay Health Care. - Ramsay offered to buy Spire on May 26 for 240 pence a share. However, investors in the UK private healthcare provider argued the bid undervalued the company. Ramsay raised its offer to 250 pence a share on July 5. - On July 19, only 69% of Spire shareholders present at a meeting approved the takeover, falling short of the 75% needed. - Toscafund Asset Management, which increased its stake in the business during takeover discussions to nearly 11%, said on July 19 it looks forward to discussions with the board on the “optimum course for the business”.