Aussies in $110m takeover

By PAUL PANCKHURST

Pacific Equity Partners - the Australian investment firm that bought Whitcoulls - is swooping on another New Zealand business with a $110 million takeover offer for Guardian Healthcare.

One of PEP's managing directors, Simon Pillar, said his firm planned to use Guardian as "a platform for growth" in the aged care sector, which is expanding as the population greys.

Based in Wellington, Guardian's core business is owning and managing 25 rest home and hospital facilities in Auckland and around the country with about 1700 beds.

It also develops and runs retirement villages and offers home-based care services, especially medical alarms.

Private equity firms such as PEP invest in businesses across a wide range of sectors, try to improve them and often exit via sharemarket floats.

The $1.95-a-share offer opened on Monday but never hit the press because Guardian is not a listed company.

It will close on November 30.

The offer's conditions include PEP securing 90 per cent of Guardian's shares.

The Takeovers Panel provided the offer documents after a request from the Business Herald.

The offer falls under the Takeovers Code because the company has more than 50 shareholders and more than $20 million in assets.

An independent adviser's report from accountancy firm Horwath Porter Wigglesworth says "lock up" agreements to buy shares meant PEP had effectively secured 43.2 per cent acceptance before the offer opened.

The top five shareholders - including founder and managing director David Renwick's Harbourside Investments - hold 29.59 per cent of the company's 52,364,130 shares.

The independent report says the balance of the company is spread among 250 shareholders who each own less than 2 per cent.

A Goldman Sachs JBWere private equity fund owns 4,166,667 convertible notes that would convert one-for-one into shares under the offer.

The report says the PEP offer puts the enterprise value of the company - the combination of equity and debt - at $176.2 million.

That compares with Horwarth Porter Wigglesworth's estimate of a fair market value of $147 million to $159 million - or $1.44 to $1.65 a share.

Unsurprisingly, the report says the offer is fair to shareholders.

It says a second private equity fund had expressed "considerable interest" and made an offer "marginally lower" than PEP's.

Pillar said his firm expected to hit 90 per cent "quite quickly". "We hope it will be completed in the next couple of weeks."

The report says three listed companies - Metlifecare, Ryman and Abano - dominate the residential village business.

However, they cater for "a relatively younger population" and provide a different mix of services.

Guardian reported a bottom-line profit of $5.6 million for the year to March 31 on revenue of $58.2 million.

It is forecasting $7.8 million and $78.7 million for this year.

The report says issues for the company include claimed under-funding by the Government of subsidies for residential care.