A planned £1 billion takeover of Spire Healthcare has collapsed after not enough shareholders backed a bid by rival Ramsay Health Care.

Spire’s board had recommended investors vote in favour of the deal but just 69.9% of shareholders supported it.

Rules state 75% shareholder approval was needed for the deal to pass.

Following the announcement, shares in Spire plunged nearly 10%.

Several leading investors had spoken out prior to the vote, claiming that the 250p-a-share offer undervalued the private hospital business, suggesting the future of the sector would grow once the pandemic ends.

Following the vote, chairman Sir Ian Cheshire said: “We respect the decision of our shareholders and will now continue to execute our strategy to deliver growth and create greater value through supporting private patients and the NHS.

“Throughout our ongoing engagement with shareholders, feedback has been overwhelmingly positive towards the long-term strategy and our strong management team.”

Sir Ian, who was formerly boss of B&Q owner Kingfisher and chairman of Barclays UK, only joined the Spire board in March and one of his first acts was to sell the bid to shareholders as a good prospect.

Toscafund Asset Management, with a 5.4% stake in Spire, voted against the deal and has been one of the leading shareholders to speak out.

A spokesman said: “We are pleased that a significant number of shareholders agreed with us and have firmly rejected this inadequate offer from Ramsay Healthcare.

“Spire is a successful and highly valuable hospital group and should deserve a higher rating in the future.

“As committed shareholders, we now look forward to discussions with the management and the Board on the optimum course for the business.”

Ramsay Health Care first approached Spire in May with a 240p-a-share bid, which was accepted by the board.

But following unrest from shareholders, this was increased to 250p-a-share, valuing the business at just over £1 billion, in what it called its final offer “with no further increase to be made”.

Spire has 39 hospitals and eight clinics across the UK, while Ramsay operates in 10 countries, including 40 hospitals in England.

The private healthcare sector has taken a hit during the pandemic, depressing the share prices of many, as firms turned over services to the NHS and non-Covid treatments declined.

Spire said prior to the vote that operating costs had increased due to the increase in PPE usage, staff and patient testing for Covid-19 and absentees due to self-isolation.

The company also said the offer reflected the need to balance increases in patient numbers with using existing capacity safely, alongside considerations of rising clinical costs.

But another investor, Fidelity, pointed out the company received and rejected a 300p-a-share bid in 2017.

Following the vote, chief executive of Spire, Justin Ash, said: “Spire had strong prospects as a standalone business before the offer from Ramsay and that remains the case today.

“Our strategy has, and will continue to, prioritise investment in patient safety and quality of care in order to deliver sustainable long-term growth; this strategy has enjoyed strong shareholder support and we have remained focused on its execution throughout the offer period.”