European private equity firm pulls out of $1.46 billion takeover of NZ village operator Metlifecare blaming COVID-19

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As we covered here in January, Metlifecare – which has 25 villages – had signed a Scheme Implementation Agreement with private equity fund manager EQT – which has EUR$41 billion in assets under management – and unanimously recommended shareholders accept the $7 per share offer which had valued the village operator at $1.49 billion.

But Metlifecare’s share price had fallen by around 54% on the back of the economic slowdown caused by COVID-19.

EQT says the SIA was subject to a number of conditions that now entitles it to terminate the agreement, including:

  • COVID-19 has reduced or is reasonably likely to reduce Metlifecare’s consolidated net tangible assets by at least NZD$100 million;
  • Coronavirus is reasonably likely to reduce the operator’s consolidated underlying net profits by at least 10% in FY20, FY21, and/or future years; and/or;
  • Metlifecare has failed to comply with its obligations under the SIA to carry on the business of Metlifecare in the ordinary course and in the same manner as conducted in the 12 months prior to the date the SIA was signed, and not to enter into arrangements outside of the ordinary course of business with such failures to comply (i) not being covered by any exceptions in the SIA; and (ii) being material to Metlifecare group taken as a whole (suggesting there may have been some arrangements that EQT considered to have broken this condition).

Village operators here must ask themselves: what will this mean for their own village valuations?