The Shareholders Association said today that the recently revised offer to Metlifecare shareholders remained problematic.
Chairman John Hawkins said that while the independent report from Northington Partners found the deal is “fair” to minority shareholders it is unclear what specific benefits will arise for them. Northington suggest the deal will be cash accretive, but then goes on to say that this will largely be the result of new units being sold for the first time. That seems to us to be a one-off gain which is not contingent on this deal, he said
The independent report identifies increased liquidity, some cost savings and notes that Vision will bring development expertise to the group. However, it also brings a lot of debt with a resultant increased risk profile for Metlifecare shareholders. Given that the independent directors have indicated that Metlifecare remains a low risk company if the merger does not proceed, we think this is a key issue for shareholders to consider said Hawkins.
The independent report also compares the combined entity to market leader Ryman Healthcare. However Hawkins said the business models are quite different as Ryman has a lot of care beds. This
makes its villages more attractive to people seeking a continuum of care. Metlifecare has some care beds but neither Vision nor PLC operates in this space.
While the independent report rates the deal as “fair” this is really because the sum of the whole at least equals the sum of the parts. However it is not actually adding much value which is what shareholders would want to see if they are to take on additional risk said
Hawkins said there was a possibility that if the meeting rejected the deal, RVNZ could dump some of its Metlifecare shares and depress the market price. Of course such a fire sale would impact their return, so it would not be a very attractive option. Vision could be sold to a competitor, but their high debt level is an issue.
He said that as it stands, the NZSA will vote any proxies it holds against the deal. We believe that despite the independent directors saying the current proposal is the best they could achieve, discussions have been continuing with institutional shareholders. Obviously, if a significantly more value accretive option was placed before the meeting the NZSA would reconsider its position.
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