More consolidation on the way? Calvary reportedly lines up $500M debt facility as Japara board recommends its $380M bid to shareholders

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Further buyouts in the aged care sector appear inevitable after Japara’s board unanimously recommended shareholders accept a $1.40 per share offer from Calvary Health Care.

As we reported in Tuesday’s SOURCE, Japara announced to the market it had entered a Scheme Implementation Deed (SID) with Calvary, known as Little Company of Mary Health Care Ltd, for its 50 aged care homes with over 4,000 residents and five retirement villages.

Calvary raised its offer of $1.20 per share for the ASX-listed provider after fellow Not For Profit Bolton Clarke made a rival $1.22 per share bid last month.

Media reports suggest Calvary – one of Australia’s largest healthcare and aged care providers with 14 hospitals and 17 aged care facilities and retirement villages – has already secured the funds for the transaction.

The Australian’s Street Talk section is reporting that the Not For Profit has lined up a new $500 million-plus debt facility to help bankroll the bid, with ANZ Banking Group, National Australia Bank and Westpac Banking Corp all agreeing to join the new debt syndicate.

Accounts show Calvary has almost $300 million in cash and cash equivalents as at June 30 last year, and borrowings worth less than $70 million, plus $265 million in mostly unused external loans and $814 million in net assets.

The additional funds would be required – Japara’s last results show it had $208 million in net debt on top of the $380 million sale price.

Its shareholders will still need to vote in favour of the deal however, which is expected to take place at a meeting in October.

Two of the group’s largest investors, Moelis Australia Asset Management, with 13.33%, and Ashens Properties Pty Ltd, the investment vehicle of co-founder and former CEO Andrew Sudholz, with 8.07%, would lose out on their investment should the vote go in Calvary’s favour.

Japara’s other major shareholder, David Di Pilla, whose Aurrum Holdings controls 9.22%, stands to triple his investment.

Regardless of the result, the deal appears to be a turn-around for the aged care sector, which has seen investors steer clear in recent years thanks to the financial and regulatory uncertainty around the industry.

With the Government’s aged care reforms likely to create further challenges and opportunities for providers, the sector can expect to see more interest from both Not For Profits and private groups – see the next story.

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