Aged care uncertainty as $600m bid for Regis Healthcare dropped
The listed Washington H. Soul Pattinson and Company and Regis co-founder Bryan Dorman have dropped their near $600m bid for aged care company Regis Healthcare, prompting a sell-off by investors.
The move drove a 14% plunge in Regis shares in early trade, from their last close of $1.86, and rattled the rest of the beaten down aged care sector, which had been viewed as a target for privatisation.
They had steadied to $1.72 in midmorning trade while rivals Japara Healthcare dipped and Estia Health edged up as market players expect further uncertainty for aged care companies as they deal with the impact of the coronavirus pandemic.
Regis investors were surprised as Soul Patts’ non-binding, indicative proposal to acquire all of the share capital of Regis for $1.85 per share via a scheme of arrangement had been sweetened last year, but it failed to win the support of the target’s board.
Soul Patts had submitted an initial proposal at $1.65 per share last September, which represented a 48% premium to previous trading. In November, with the support of the Regis co-founder and major shareholder, it lifted this to $1.85 per share.
The suitor said it believed that the two proposals provided Regis shareholders with a highly attractive opportunity to realise value for their shares in light of the significant uncertainty and funding challenges currently facing the aged care industry.
But both proposals were rejected by the Regis board, prompting it to dump the move.
Regis was co-founded by Mr Dorman and Ian Roberts, who collectively own about 54% of the business.
Soul Patts, which was working with its own advisory firm, Pitt Capital Partners, and Credit Suisse, made its bid after circling the company since the onslaught of the COVID-19 pandemic that prompted the Regis share price to fall to about 70c.
It initially offered $1.65 a share on 30 September, teaming up with Skip Capital, the company of billionaire Atlassian co-founder Scott Farquhar. But Skip Capital was reported not to be part of Soul Patts’ sweetened offer.
Soul Patts has an exposure to the aged care industry after partnering with the Moran Health Care Group to develop retirement facilities.
Regis, advised by Flagstaff Partners, has drawn takeover interest partly due to its property portfolio. But aged care companies have been hard hit by higher costs linked to the pandemic and face a funding shake-up once the aged care royal commission report is handed down next month.