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Metlifecare to raise up to $45.5M in equity; Retirement Village to sell down stake

Wednesday 2nd November 2011

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Metlifecare, the retirement home operator, is to seek up to $45.5 million in new capital, while 82 percent-owner Retirement Village Group will sell down its stake.

The company posted details of its recent strategic review on the NZX today, saying the primary equity raising was to provide “financial headroom for growth”, while RVG’s secondary offering of $50 million to $70 million would reduce its holding to between 50 and 55 percent.

The changes will also see the appointment of three independent directors, including possibly an independent chair, three RVG directors, and the managing director.

Once an initial $40 million share sale to institutional and experienced investors, and RVG’s sell-down are completed, a further $5.5 million shares will be offered in a share purchase plan, details of which are yet to come.

The moves reflect a combination of investment opportunities in the retirement village sector, a $10 million debt reduction, and a desire to see the shares more widely owned and traded, with at present some 13 shareholders controlling almost the entire register.

As a result, the company had low trading metrics compared to industry peers.

The shares went into trading halt this morning for the offer to open, with bookbuilding to occur over the next day, settlement of placement due next Thursday, Nov. 10, and allotment and trading of placement shares on Nov. 11.

With the initial $40 million of new capital, net debt to net tangible assets will fall from 24 percent to 15 percent, and Metlifecare’s ratio of net debt to equity will fall to 13 percent, from 19 percent at present.

New investments identified were in existing centres and at greenfield sites, along with potential for consolidation.

The company also expected to return to paying dividends, initially targeting between 2 cents and 4 cents a share, with dividends likely to paid after the 2012 financial year result.

“The partial sell down of our cornerstone position would considerably increase the liquidity of Metlifecare shares and RVG does not, in the medium term, anticipated a further sell down in its Metlifecare shareholding,” said John Schaap, chairman of Retirement Villages Australia.

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