Arvida Queenstown is on the Frankton-Ladies Mile Highway at Frankton. Photo / Arvida Group
Arvida Queenstown is on the Frankton-Ladies Mile Highway at Frankton. Photo / Arvida Group
Analysis by Anne Gibson
Anne Gibson, Property Editor for New Zealand's Herald, has been writing about real estate since 1985 and is a skilled and knowledgeable journalist with deep insights into property as well as other businesses.
Shareholders in takeover target retirement giant Arvida Group by New York-headquartered private equity business Stonepeak are due to get an independent adviser’s report around the end of September and vote on the scheme before Christmas.
On Monday, Arvida’s board announced it had recommended shareholders accept the $1.70/share offer,which is 65% above the $1.03 the stock was trading at pre-offer on Friday, July 19.
The offer was reported as not surprising by Harbour Asset Management’s Shane Solly, who said high New Zealand interest rates had particularly hurt the listed retirement sector and driven share prices down. That spelt excellent buying opportunities for investors.
Grant Samuel is due to issue its independent adviser’s report in the next few weeks, although no exact date has been announced.
Analysts wrote positively about the offer, one saying the premium Stonepeak is paying was above historical takeover averages in the last decade.
Aaron Ibbotson and Benjamin Crozier of Forsyth Barr said it would be in this year’s third-quarter end that shareholders would get further information from Arvida and the independent adviser’s report, “including reasons why the independent directors have voted in favour”.
By this year’s fourth quarter, shareholders would vote on the proposal. For it to pass, 75% of votes on more than half the shares must back it.
“Arvida has indicated after feedback from shareholders it is ‘very confident of shareholder support for the scheme’,” the Forbar analysts wrote in their report this week. Forbar is advising Arvida and earns fees for that, their report also noted.
The aged care sector had performed well since the Reserve Bank signalled a more dovish stance earlier in July.
“However this was from, in our view, very depressed levels. We still see room for strong performance in the sector and believe a reduced RBNZ OCR, a macro backdrop improving from rock bottom and demonstrating improved cash conversion of earnings could act as near-term catalysts. Specifically, we see an interest rate cut in August as a clear possibility and one or more before year end as highly likely,” the Forbar analysts said.
Like the Metlifecare deal, there was an element of opportunistic timing involved in Stonepeak’s offer, they noted.
Jarden head of research Arie Dekker.
“While there are clear differences with the sector’s strongest performer, Summerset Group, we see Arvida as better positioned than Oceania Healthcare on development readiness and portfolio composition.
“With a long tail of smaller, less integrated sites lacking continuum of care, we would see Arvida as likely to take a more pragmatic approach to value realisation on non-core assets under private ownership, particularly against growth uses for the capital,” the Jarden analysts wrote.
Arvida had more limited capacity for growth than its peers but “under private ownership, we expect it would be less likely to share the market’s aversion to using equity to fund organic growth where returns are supportive”.
‘Above historical average’ - UBS
UBS analyst Bianco Fledderus released an analysis saying the offer was well above the 36% historical average premium for successful full takeovers in New Zealand in the past 10 years.
Even more notably, Stonepeak’s offer was well above that when EQT took over one of Arvida’s competitors in 2020: EQT paid a 15% premium for those Metlifecare shares back then, she noted.
Jeremy Nicoll, Arvida Group chief executive, wrote to shareholders about the deal on July 24. Photo / Dean Purcell
Fledderus also outlined the steps possible for the deal to go ahead. She indicated possible timeframes.
These dates were only possible projections, she stressed, based on a broad indication of what may occur at or around these times.
July 20: Execution of the agreement between Arvida’s board and Stonepeak;
July 22: Announcement to NZX that the takeover agreement had been entered into;
August 9: Stonepeak to submit its application to the Overseas Investment Office;
August 13: Arvida to submit its vendor information to that same office;
August 23 Comments on scheme booklet provided by Stonepeak to Arvida;
August 30: Final draft scheme booklet provided to Stonepeak for review;
Final draft scheme booklet including independent adviser’s report provided to Takeovers Panel for review;
Final draft scheme booklet excluding independent adviser’s report provided to Stonepeak;
Late August: Scheme booklet including independent adviser’s report approved by Takeovers Panel;
Takeovers Panel due to then issue a letter of intention;
September 1: Application for initial orders filed by Arvida with the court;
Early September: First court date as soon as possible, subject to availability;
Early November: Court may around this time grant initial orders if it sees fit;
November 14: Scheme booklet sent to shareholders, including independent adviser’s report;
December 3: Time and date for determining eligibility to vote at scheme meeting;
Early December: Arvida applies to Takeovers Panel for a no-objection statement;
December: Takeovers Panel could issue a no-objection statement around this time;
January 15, 2025: Shares in Arvida trading on the stock exchange suspended;
Early February 2025: Implementation date for the deal.
Nick Mar, a Macquarie analyst, noted Arvida’s announcement last December of interest from a buyer.
Shares were trading higher then.
“The takeover offer announced is the same bidder at the same price, and it appears Arvida will have been working on this prior to the May announcement of the value recognition programme. The premium to the share price is however larger now at around 65% above last close and 82% above volume-weighted average price vs in September 23, where it was around a 35% premium to where ARV was trading,” Mar noted.
Arvida Peninsula Club at Auckland's Stanmore Bay.
Macquarie has an “outperform” on Arvida, Mar saying he viewed the sector as materially undervalued.
The key catalyst to restoring confidence was a broad housing recovery allowing for improved sales, reduced stock, lower debt and the ability to resume build rate growth.
“Sentiment in the sector has shifted in the last month with a more dovish RBNZ and expectations of mortgage rate cuts sooner than later, while the takeover price more quickly recognises this upside,” Mar noted.
Shares are trading around $1.62, giving a market cap of $1.1 billion.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
