Metlifecare merger with Vision Senior, Private Life Care deemed fair to minorities

Tuesday 5th June 2012

Metlifecare’s proposal to merge with Vision Senior Living and Private Life Care Holdings is fair to the rest home operator’s minority shareholders, according to an appraisal report by Northington Partners.

Under a deal that will deliver eight new rest homes for the company, VSL's private equity shareholders Goldman Sachs and Arrow International will receive 13 million shares with the prospect of a further 7 million shares within 28 months if the stock reaches a target of $3, a level it hasn’t traded at since November 2008.

Owners of Private Life Care Holdings, which is putting three villages into the merged entity, will receive 29.7 million shares and those shareholders will sell between 16.5 million and 22.5 million shares on settlement of the deal. PLC is owned by Metlifecare's biggest shareholder, Retirement Village Group.

“Taking all the key elements of the proposed transaction into account, we conclude that the terms and conditions are fair to Metlifecare minority shareholders,” the Northington report says.

The merger is at an appropriate value, provides a level of protection for existing shareholders against the merged entity performing poorly and gives them “potential share-price upside,” it says.

The deal is valued at $216 million on a net tangible asset basis, with $83 million attributed to VSL, $123 million to PLC, and $10 million of new capital.

Metlifecare expects to add an extra $23.2 million in operating cash flow, or 7 cents per share, in the 2013 financial year. Operating cash flow after funding is forecast to be $52.7 million in 2013, from a predicted pre-merger $26.5 million in 2012, and $22.5 million in 2011.

The merger will boost Metlifecare's portfolio to 24 villages, three of which are in development. The number of units will increase to 3,902 from 2,460, while brownfield and greenfield capacity climbs to 1,011 units from 380 units.

Metlifecare will raise $10 million of additional capital from third party investors, using the funds to repay debt.

The shares last traded at $2.08 and have declined 8.4 percent this year.

BusinessDesk.co.nz

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