NZ: European private equity firm axes $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 has fallen from NZ$6.87 on 29 December 2019 – the date of the SIA – to a low of NZ$3.73 on 30 March 2020 – around 54% – on the back of the economic slowdown.

The SIA was subject to a number of conditions which EQT says 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).

Like other village operators, construction on Metlifecare’s developments is on hold and its homes and villages are locked down under New Zealand’s strict Stage 4 restrictions.

Metlifecare’s share price dropped another 23% to NZ$3.26 on the news.

Other NZ operators have also seen similar falls in their prices including Summerset, down more than 40%, and Arvida and Ryman, both down over 30%.

The news is a blow to a sector that has been rapidly growing in recent years with village operators making up the lion’s share of NZ construction industry.

Village operators here must ask themselves: what will this mean for their own plans to sell or expand?

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