Bain Capital’s $551 million bid sends Estia Health shares to near 5-year high

By Rishav Chatterjee and Scott Murdoch

(Reuters) -Global private equity firm Bain Capital will pay A$838 million ($551.3 million) for Australian aged care operator Estia Health, pushing the takeover target’s stock to a near five-year high in a sign that appetite for deals down under remains strong.

The Sydney-based Estia said on Monday it had signed a deal to finalise the takeover at A$3.20 per share which is a 25.5% premium to Estia’s stock closing price on June 6, before the offer was first disclosed.

Shares of Estia Health were up 9.9% at A$3.12 as of 0045 GMT, their highest since Sept 2018.

The purchase extends Bain Capital’s focus on Australia where its prized asset is the Virgin Australia airline it bought during the pandemic, which is currently preparing for a public market listing.

In a statement, Bain Capital said Estia would be added to the firm’s $14 billion worth of capital it has deployed in the global healthcare sector.

Estia’s stock has seesawed from a peak of $A7 in 2015 to as low as A$1 in March 2020 when Australia began to implement strict pandemic lockdowns.

In June, the company updated the market on its intentions to back Bain Capital’s increased offer of $A3 per share to A$3.20. It said it would provide limited access to its books to the suitor in April.

Estia is one of Australia’s largest aged care operators, having more than 6,500 places in 70 sites across the country.

“The Board is confident as to the outlook for the business, however, it recognises that the scheme allows shareholders to realise certain cash value now at an attractive premium,” Estia Chair Gary Weiss said on Monday.

Estia’s board unanimously recommended its shareholders vote in favor of the proposal. A shareholder vote is set to happen in November.

“The problem is now that with the rapid rise in interest rates the buyers that would buy a restructured asset post-Bain Capital are greatly reduced in the market,” said Brad Smoling, Smoling Stockbroking managing director.

“If they acquire Estia Health they may be stuck with it in the days ahead.”

The company said in a statement that under the deal, it is permitted to pay fully franked dividends of up to A$0.12 per share.

($1 = 1.5200 Australian dollars)