Metlifecare amends merger deal again

Thursday 21st June 2012

Metlifecare has amended the terms of its merger proposal again, halving the shares it will issue to Vision Senior Living and flagging possible property sales as a way to repay debt rather than raising equity from third parties.

The 11th hour changes have won over the majority of institutional investors and the company is confident the merger will win support at a shareholder meeting today to vote on the plan.

The rest-home operator’s initial proposal was criticised as being too generous to major shareholders, who are involved in the merger. Metlifecare will get eight new rest homes in the merger with Vision and Private Life Care Holdings, which are to receive shares in the enlarged company as payment.

Under amendments announced today, the consideration for Vision shareholders is cut to 10 million shares from 20 million.

Instead of raising $10 million in equity from third-party investors, the company will now “rationalise its property asset portfolio to provide further headroom in its balance sheet,” according to the statement from managing director Alan Edwards. That move has the support of the company’s bankers, he said.

“The majority of Metlifecare’s institutional shareholders have advised that the transaction, following these amendments, will be supported,” Edwards said. The company’s independent directors and management “are confident that the proposed acquisition will receive the requisite support at today’s meeting.”

Metlifecare has also hired CBRE to value its assets for the year ending June 30 and said given recent transactions in the sector and the level of economic activity, the discount rates and property price growth assumptions may be downgraded.

“Initial discussions and analysis indicate that these changes will result in a reduction to Metlifecare’s net assets of between 15 percent and 20 percent relative to 31 December 2011,” the company said.

Under the old proposal, Vision’s private equity shareholders Goldman Sachs and Arrow International were to have received 13 million shares with the prospect of a further 7 million shares within 28 months if the stock reached a target of $3, a level it hasn’t traded at since November 2008.

The stock last traded at $2.16.

The plan was changed even though an independent report by Northington Partners deemed the original version fair to minority shareholders.

Private Life Care is owned by Metlifecare's biggest shareholder, Retirement Village Group.

The merger will boost Metlifecare's portfolio to 24 villages, three of which are in development. The number of units will increase to 3,902 from 2,460, while brownfield and greenfield capacity climbs to 1,011 units from 380 units.

BusinessDesk.co.nz

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