Published 22 May 2012
The cost to Metlifecare Ltd of its 3-way merger proposal dropped by $20 million to $88 million yesterday, with provision for the payment to the outside party in the deal, Vision Senior Living Ltd, to rise again if the listed company’s share price rises by 50% to $3 in 28 months. Since the deal was announced on 7 May, Metlifecare’s share price has dropped 15c to $2.05.
The whole deal has been structured around prices at 55% of each company’s asset backing, which meant that under the original deal Metlifecare would pay $108 million to Vision and the third party, Private Life Care Holdings Ltd, which is owned by Metlifecare’s biggest (50.07%) shareholder, Retirement Village Investments Ltd.
After feedback from its own shareholders, Metlifecare came out yesterday with a revised deal cutting the payments and extending the time before shareholders in the 2 unlisted partners in the deal can sell out of the listed company.
Under the original deal, escrow arrangements meant Retirement Village Investments could sell down 16.5 million Metlifecare shares to retail investors but couldn’t allow its stake to fall below 35% within 12 months. 2 private equity funds holdings stakes in Vision could distribute shares in-specie after 6 months but other Vision shareholders couldn’t sell for 12 months.
Under the revised deal, Retirement Village Investments will get 29.7 million shares instead of 30.5 million, but can sell down more of them (22.5 million instead of 16.5 million). The balance must be held for 16 months. The selldown will cut Retirement Village Investments’ Metlifecare stake from 50.07% to 41-45% (undiluted), 40-43% (diluted).
The immediate payment to Vision shareholders will be cut from 21 million to 13 million shares, but can rise by 7 million shares in 28 months if the price then exceeds $3. The escrow periods for Vision shareholders extend from 6 & 12 months to 16 months.
Under the original deal, Metlifecare was going to pay Vision shareholders $10 million in shares (at $2.40/share) to repay debt. Now, that transaction is cancelled and Metlifecare will seek to raise $10 million of equity from other investors instead, still using the money to pay down debt but having to issue more shares on the current trend (up from 4.17 million to 4.88 million in the fortnight since the deal was announced).
Metlifecare’s independent directors, Brent Harman & John Loughlin, have commissioned an independent appraisal report from Northington Partners Ltd.
Queensland developer FKP Ltd holds 22% of the top company in the chain of control of its New Zealand retirement village investments, RVNZ Investments Ltd, and the Sydney-based management company (now fully controlled by FKP) another 1%, along with 17 institutional investors.
After Vision Senior Living recapitalised in December 2008, trebling equity, Goldman Sachs funds held 58.6% of that company and Arrow International Group Ltd 31.9%. Goldman Sachs also held an option to force the sale of the business.
9 May 2012: Metlifecare deal at 55% NTA
9 March 2012: Metlifecare secures new funding facilities
20 February 2012: Lift in property values boosts Metlifecare
13 January 2012: Macquarie exits Metlifecare fund management
14 December 2011: Metlifecare gets 70% takeup from small investors
8 November 2011: Australians’ Metlifecare sell-off succeeds at 54% of entry price
4 November 2011: Australians offer to cut Metlifecare stake with 2-pronged offer
On the move, January 2010, Vision Senior Living recapitalisation follows Bourke’s departure
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Attribution: Company release, story written by Bob Dey for the Bob Dey Property Report.