Retirement village operator Arvida Group has launched an $80 million initial public offering (IPO) in a bid to become the country's fourth largest retirement operator.
The IPO is unusual in that from 40 independent and established rest-home applicants from around the country, Arvida chose 17 facilities to come under its umbrella. They will all be integrated in coming months.
Unlike competitors Ryman Healthcare, Summerset and Metlifecare, Arvida has started by bringing together the portfolio of independents, then seeking a stock exchange listing.
The IPO, priced at 85c to $1 per share, wants to raise $80 million, of which most will go towards paying off debt at the 17 facilities.
They have an average of $5 million debt each.
About $2 million to $3 million could be used to pay exiting shareholders, chief financial officer Jeremy Nicoll said.
After the IPO, Arvida was expected to have about $7.8 million of debt on its books and good cashflows.
It is concluding a debt facility arrangement with the ANZ bank for $40 million, for later growth.
In return for their holdings, the owners of the 17 facilities will get Arvida shares, not cash.
After the IPO, the existing investors, directors and management will hold 60% of Arvida shares, which must be held in escrow until May 31, 2016.
Chief executive Bill McDonald emphasised the initial focus of Arvida was the integration of the 17 facilities, with benefits to come from synergies, cross-use of staff skills and in compliance issues.
Asked about future acquisitions, Mr McDonald said there was nothing ahead ''in the near term'', but there could be, six months after the integration process was completed.
''They would have to be earnings-accretive,'' Mr McDonald said of any acquisition, meaning it would have to contribute positively, immediately, to the group balance sheet.
Craigs Investment Partners broker Peter McIntyre said while operators Ryman, Summerset and Metlifecare gained a lot of attention, the overall aged care sector ''remained fragmented''.
There were a lot of small operators around the country who could be ''consolidated'' into a larger organisation or group.
As of August, there were more than 450 retirement villages and more than 27,000 retirement units in New Zealand.
''There could still be corporate action [acquisitions] in the sector in the future,'' Mr McIntyre said.
Mr McDonald noted while no new build facilities were on the horizon for Arvida, there were in-house development opportunities.
Within the 17 existing facilities there was potential for up to 250 units, or care beds, but ''in time''.
On the point of difference between Arvida and its competitors, Mr McDonald said Arvida had a higher entry level age, at 82, compared with an average of 75 elsewhere in New Zealand and Australia, and a higher average age of retiree at 86, compared with up to 80 around the country.
Aged demographics, from 2011 to 2036, estimate those over 75 will increase from 587,000 to 1.21 million and those over 85 increase from 73,100 to 195,000.
About 80% of Arvida's portfolio delivered care services - care beds or serviced apartments - which would make Arvida the ''second largest operator [in New Zealand] by care'', he said.
He said Arvida's occupancy rates were ''up to 96%'', compared with a 91% New Zealand average.
For its first full year to March 2016, Arvida expects to book underlying profit of $13.2 million and after-tax profit of $10.6 million, on more than $52 million revenue.
Arvida intends paying dividends of 60%-80% of annual underlying profit.
The IPO, being arranged by brokerage Forsyth Barr, expects pricing and allocation to be completed by November 21, with the offer to close on December 15 and to start trading on the NZX on December 18.
• All Blacks including Dan Carter, Richie McCaw and Kieran Reid own shares in one of the 17 facilities, Christchurch's Park Lane Retirement Village, The New Zealand Herald reported.
Arvida Group
• 17 established facilities
• 1800 residents and 1000 staff
• 54% of facilities for aged care
• 15% facilities serviced apartments.
• 952 care beds
• 812 retirement units
• 10 of 17 facilities in Christchurch and Rangiora, with remainder in Blenheim, Nelson (2), Waikanae, Palmerston North, New Plymouth and Bay of Plenty.
• Market valuation of existing 17 facilities: $227m.
• Market capitalisation after initial public offer: between $199.8m and $221.4m.
Source: Arvida Group
