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Quadrant seeks up to $136 mln in partial float of Summerset

Wednesday 28th September 2011

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Quadrant Private Equity is looking to repeat its success with the Kathmandu Holdings float, seeking up to $136 million in a partial sell-down of its stake in retirement village owner Summerset Group when it lists on the NZX.

The Australian group has lodged an investment statement and prospectus with the Registrar of Financial Service Providers and seeks to raise between $122.5 million and $136 million in an initial public offering of 30% of Summerset Group.

That’s based on an indicative price range of $1.40 to $1.60 valuing the retirement village operator at between $301 million and $336 million.

“Summerset is a quality business with very favourable underlying demand drivers and as a result, good growth prospects,” chairman Rob Campbell said in a statement. “This is positive for the local capital market.”

Campbell was appointed chair earlier this month to assess the options available to Quadrant for a new capital structure. Quadrant completed its full takeover of Summerset last year when the Overseas Investment Office signed off on the deal, buying the 50% it didn’t own from fund manager AMP Capital Investors New Zealand.

AMP Capital sold up after it failed to get the retirement village operator away in a public float in 2007. Quadrant came on board in 2008, investing A$90.5 million of a A$500 million private equity fund.

The offer will be made up of a partial selldown and a primary capital raising of $50 million to pay for further growth as Summerset looks to build 250 new units every year for the next five years.

The retail offer will be available to New Zealand resident clients of NZX firms who have received an allocation from that firm, and a pool for Summerset residents and employees.

An institutional offer will also be made, though there won’t be a public pool for investors.

The retirement village operator has flagged a listing for Nov. 1. Craigs Investment Partners and Deutsche Bank, and First NZ Capital are joint book-runners, joint lead managers and joint organising participants for the initial public offering. Forsyth Barr was also appointed a joint lead manager.

The company is forecasting pro forma net operating cashflows of $51.9 million and total investment properties worth $632.6 million in the financial year ended Dec. 31, 2012. It expects underlying profit after tax of $6 million this financial year, rising to $9.7 million in 2012.

Summerset is New Zealand’s third-biggest retirement village operator, and has the second-fastest pace of construction.

The retirement village operator made a loss of $1.8 million in the 2010 calendar year after booking a $5.9 million tax charge from Budget 2010 depreciation rule changes, compared to a profit of $1 million a year earlier.

Operating profit rose 8.7% to $7.5 million on a 39% surge in revenue to $34.2 million, while finance costs almost halved to $3.4 million.

Quadrant successfully floated Kathmandu Holdings on the NZX and ASX in 2009, raising A$375 million for the first float on the New Zealand exchange in 22 months, and last year bought Asia Pacific media intelligence agency Media Monitors Australia Pty.

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