Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>An Australian Royal Commission on aged care providers was <a href="https://agedcare.royalcommission.gov.au/sites/default/files/2021-03/final-report-volume-1_0.pdf" target="_blank" rel="noopener">issued</a> on the 26 February 2021 with 148 recommendations to address what was deemed a weak and ineffective regulatory arrangement, including a new aged care act, the introduction of a system of star rating system for facilities, and some form of aged care levy for the funding of the system. The government also made an initial pledged of $452mn in additional funding.</p>
<p>The share price reaction to the report from the three key aged-care Aussie listed operators - <a href="https://www.smartkarma.com/entities/regis-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:2086:1" rel="noopener">Regis Healthcare (REG AU)</a>, <a href="https://www.smartkarma.com/entities/estia-health-ltd" target="_blank" data-smartkarma-citation="entities:77:1" rel="noopener">Estia Health (EHE AU)</a>, and <a href="https://www.smartkarma.com/entities/japara-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:14760:1" rel="noopener">Japara Healthcare (JHC AU)</a> - was largely one of "meh". Nevertheless, the ongoing speculation as to the Royal Commission findings, in tandem with COVID, had resulted in Japara's shares trading down 75% in the last five, and ~60% a-piece for Regis and Estia in the same time frame, at that time.</p>
<p>Neither company, to date, has comprehensively addressed the conclusions of the report.</p>
<h3>The New News</h3>
<p>JHC <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02369261-3A566260?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> this morning it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.</p>
<p>JHC said it is reviewing its options.</p>
<p>My initial reaction is that this is an opportunistic bid. This is the third Offer in this space in the last year. <a href="https://www.smartkarma.com/entities/metlifecare-ltd" target="_blank" data-smartkarma-citation="entities:19219:1" rel="noopener">Metlifecare Ltd (MET NZ)</a> was eventually taken private.  Regis fielded an Offer from its co-founder and <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson And Co. (SOL AU)</a> in September last year, which was subsequently withdrawn, despite a bump in terms. Regis has outperformed the market since.</p>
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<div>More below the fold.</div>
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An Australian Royal Commission on aged care providers was issued on the 26 February 2021 with 148 recommendations to address what was deemed a weak and ineffective regulatory arrangement, including a new aged care act, the introduction of a system of star rating system for facilities, and some form of aged care levy for the funding of the system. The government also made an initial pledged of $452mn in additional funding.
The share price reaction to the report from the three key aged-care Aussie listed operators - Regis Healthcare (REG AU), Estia Health (EHE AU), and Japara Healthcare (JHC AU) - was largely one of "meh". Nevertheless, the ongoing speculation as to the Royal Commission findings, in tandem with COVID, had resulted in Japara's shares trading down 75% in the last five, and ~60% a-piece for Regis and Estia in the same time frame, at that time.
Neither company, to date, has comprehensively addressed the conclusions of the report.
The New News
JHC announced this morning it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.
JHC said it is reviewing its options.
My initial reaction is that this is an opportunistic bid. This is the third Offer in this space in the last year. Metlifecare Ltd (MET NZ) was eventually taken private.  Regis fielded an Offer from its co-founder and Washington H. Soul Pattinson And Co. (SOL AU) in September last year, which was subsequently withdrawn, despite a bump in terms. Regis has outperformed the market since.

More below the fold.


Japara Healthcare (JHC AU): Here Comes The Calvary

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<p><a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson And Co. (SOL AU)</a> ("Soul Patts") has teamed up with Bryan Dorman, co-founder of aged-care provider <a href="https://www.smartkarma.com/entities/regis-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:2086:1" rel="noopener">Regis Healthcare (REG AU)</a>, in making a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02311146-3A555888?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">non-binding indicative proposal</a> of A$1.85/share by way of a Scheme. The Offer implies an equity value of A$557mn and an enterprise value of A$773mn.</p>
<p>The Offer Price is a 25% premium to the last close and a 64% premium to the three-month VWAP.</p>
<p>Dorman, via Ashburn P/L, holds 27.2% in Regis. Ian Roberts, Regis' other co-founder, holds 27.2%.</p>
<p>A scrip alternative into a newly incorporated company is also proposed, in which Dorman will hold 27.2%, and Soul Patts a maximum of 72.8%, before any additional scrip taken up by Regis' shareholders.</p>
<p>As per the substantial shareholder <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02311153-3A555890?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announcement</a>, Soul Patts also made a non-binding and indicative offer for Regis on September 30, in "<em>partnership with a financial partner</em>". No other details relating to that proposal were disclosed.</p>
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<p>Regis was only listed on the <a href="https://www.regis.com.au/site/wp-content/uploads/pdf/Regis-Healthcare-Prospectus.pdf" target="_blank" rel="noopener">14 October 2014</a>, at $3.65/share.</p>
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<p>More below the fold.</p>
</div>


Washington H. Soul Pattinson And Co. (SOL AU) ("Soul Patts") has teamed up with Bryan Dorman, co-founder of aged-care provider Regis Healthcare (REG AU), in making a non-binding indicative proposal of A$1.85/share by way of a Scheme. The Offer implies an equity value of A$557mn and an enterprise value of A$773mn.
The Offer Price is a 25% premium to the last close and a 64% premium to the three-month VWAP.
Dorman, via Ashburn P/L, holds 27.2% in Regis. Ian Roberts, Regis' other co-founder, holds 27.2%.
A scrip alternative into a newly incorporated company is also proposed, in which Dorman will hold 27.2%, and Soul Patts a maximum of 72.8%, before any additional scrip taken up by Regis' shareholders.
As per the substantial shareholder announcement, Soul Patts also made a non-binding and indicative offer for Regis on September 30, in "partnership with a financial partner". No other details relating to that proposal were disclosed.

Regis was only listed on the 14 October 2014, at $3.65/share.

More below the fold.


Regis Healthcare (REG AU): Potential New Home For The Old

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<p>Late last week, the High Court hearing to sanction <a href="https://www.smartkarma.com/entities/metlifecare-ltd" target="_blank" data-smartkarma-citation="entities:19219:1" rel="noopener">Metlifecare Ltd (MET NZ)</a>'s Scheme was <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/NZX-Release-_Scheme-Update-Court-deferral_141020.pdf" target="_blank" rel="noopener">delayed</a> from the 15 October until the 20 October. The deferral was a consequence of the Takeovers Panel <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/NZX-Release-TKP-131020-2.pdf" target="_blank" rel="noopener">delaying</a> its decision (on the 13th October) on whether to issue a ‘no objection’ statement.</p>
<p>"<em>The deferrals (had) been caused by the lodgement of a Notice of Opposition to the Scheme by a Metlifecare shareholder and will result in a consequential delay to the Scheme timetable. In the event that final Court orders are granted in the middle of next week, the implementation date would consequentially be 3 November 2020</em>."</p>
<p>The opposing shareholder was ResIL Investments Limited, holder of 1,000 shares and 7,000 retail bonds, who considered the information MET provided to its shareholders in the Scheme Booklet was inadequate and/or misleading and incorrect.</p>
<p>Yesterday, the Panel gave a "no objection" <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/Announcement_re_Takeovers_Panel__no_objection__letter.pdf" target="_blank" rel="noopener">statement</a>. The Court does not necessarily rely on this statement - but it usually does. ResIL subsequently <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/110b.-Scheme-Update-Withdrawal-of-Notice.pdf" target="_blank" rel="noopener">withdrew</a> its opposition.</p>
<p>Today the High Court <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/111b.-Scheme-Receives-Final-Court-Approval.pdf" target="_blank" rel="noopener">issued</a> final orders in respect of the Scheme.  Done &amp; dusted - with shares suspended from trading at the close of the 23 October.</p>
<p>The <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/111c.-High-Court-Judgment.pdf" target="_blank" rel="noopener">judgment</a> makes for concise, informative reading, should a situation such as this arise in the future.</p>
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<p>As always, more below the fold.</p>
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Late last week, the High Court hearing to sanction Metlifecare Ltd (MET NZ)'s Scheme was delayed from the 15 October until the 20 October. The deferral was a consequence of the Takeovers Panel delaying its decision (on the 13th October) on whether to issue a ‘no objection’ statement.
"The deferrals (had) been caused by the lodgement of a Notice of Opposition to the Scheme by a Metlifecare shareholder and will result in a consequential delay to the Scheme timetable. In the event that final Court orders are granted in the middle of next week, the implementation date would consequentially be 3 November 2020."
The opposing shareholder was ResIL Investments Limited, holder of 1,000 shares and 7,000 retail bonds, who considered the information MET provided to its shareholders in the Scheme Booklet was inadequate and/or misleading and incorrect.
Yesterday, the Panel gave a "no objection" statement. The Court does not necessarily rely on this statement - but it usually does. ResIL subsequently withdrew its opposition.
Today the High Court issued final orders in respect of the Scheme.  Done &amp; dusted - with shares suspended from trading at the close of the 23 October.
The judgment makes for concise, informative reading, should a situation such as this arise in the future.

As always, more below the fold.






Metlifecare: Scheme Sanctioned. Potential Bad Precedent Averted

<p>This is shaping up to be the week when the sanctioning of Schemes by the Courts goes awry.</p>
<p>Last Friday, Hong Kong's High Court <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1005/2020100502577.pdf" target="_blank" rel="noopener">declined to sanction</a> <a href="https://www.smartkarma.com/entities/allied-properties-h-k-limited" target="_blank" data-smartkarma-citation="entities:19953:1" rel="noopener">Allied Properties (H.K.) (56 HK)</a>'s Scheme. (<em><a href="https://skr.ma/Utws3" target="_blank" rel="noopener">Allied Properties (56 HK): Amateur Hour</a></em>). I would expect the Offeror, <a href="https://www.smartkarma.com/entities/allied-group-ltd" target="_blank" data-smartkarma-citation="entities:4387:1" rel="noopener">Allied (373 HK)</a>, to appeal the decision,  especially noting the irrelevancy of the headcount test discussed at length in the judgment, which likely influenced the judge's final opinion.</p>
<p>Tomorrow there is a high likelihood that New Zealand's High Court postpones the final hearing on the <a href="https://www.smartkarma.com/entities/metlifecare-ltd" target="_blank" data-smartkarma-citation="entities:19219:1" rel="noopener">Metlifecare Ltd (MET NZ)</a>'s Scheme.</p>
<p>At MET's Scheme Meeting on the <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/NZX-Release-and-Results-Announcement.pdf" target="_blank" rel="noopener">2 October</a>, 90.7% of the votes case voted for the Scheme. 9.14% (or 14.96mn shares) voted against. </p>
<p>Of those naysayers, 1,000 shares are held by ResIL Investments Limited, who has, in a detailed letter (attached at the end of this insight) flagged what it perceives as breaches in the Takeovers Code, with reference to the valuation methodology in the Scheme Booklet</p>
<p>Those perceived breaches have been submitted to the Takeovers Panel.</p>
<p>Ahead of tomorrow's hearing, the Panel will need to consider ResIL's objections and whether the standard of disclosure is consistent with that required under the Code. If no objection, the Panel will issue a no-objection statement to approve the Scheme.</p>
<p>Yet merely obtaining a no-objection statement from the Takeovers Panel does not necessarily mean that the Court will approve a scheme.</p>
<p>There are no dissent or buy-out rights for shareholders who do not support Schemes in New Zealand. In effect, this is a statutory vacuum. It would be a dangerous precedent if this Scheme is not sanctioned after a disgruntled shareholder contends the contents of the Scheme Booklet are flawed - <em>after</em> the shareholder lost the vote.</p>

This is shaping up to be the week when the sanctioning of Schemes by the Courts goes awry.
Last Friday, Hong Kong's High Court declined to sanction Allied Properties (H.K.) (56 HK)'s Scheme. (Allied Properties (56 HK): Amateur Hour). I would expect the Offeror, Allied (373 HK), to appeal the decision,  especially noting the irrelevancy of the headcount test discussed at length in the judgment, which likely influenced the judge's final opinion.
Tomorrow there is a high likelihood that New Zealand's High Court postpones the final hearing on the Metlifecare Ltd (MET NZ)'s Scheme.
At MET's Scheme Meeting on the 2 October, 90.7% of the votes case voted for the Scheme. 9.14% (or 14.96mn shares) voted against. 
Of those naysayers, 1,000 shares are held by ResIL Investments Limited, who has, in a detailed letter (attached at the end of this insight) flagged what it perceives as breaches in the Takeovers Code, with reference to the valuation methodology in the Scheme Booklet
Those perceived breaches have been submitted to the Takeovers Panel.
Ahead of tomorrow's hearing, the Panel will need to consider ResIL's objections and whether the standard of disclosure is consistent with that required under the Code. If no objection, the Panel will issue a no-objection statement to approve the Scheme.
Yet merely obtaining a no-objection statement from the Takeovers Panel does not necessarily mean that the Court will approve a scheme.
There are no dissent or buy-out rights for shareholders who do not support Schemes in New Zealand. In effect, this is a statutory vacuum. It would be a dangerous precedent if this Scheme is not sanctioned after a disgruntled shareholder contends the contents of the Scheme Booklet are flawed - after the shareholder lost the vote.

New Zealand

Metlifecare Limited provides private health care services through its ownership, operation and management of retirement villages, nursing homes and geriatric hospitals along with the marketing of services allied to these facilities throughout New Zealand.

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Metlifecare Ltd (MET NZ)

Last Week in Event SPACE: Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Japara Healthcare (JHC AU): Here Comes The Calvary

For what is likely a sector in recovery mode, one in which the Commission overhang is largely removed, and a comprehensive reform package to be...

David Blennerhassett

Regis Healthcare (REG AU): Potential New Home For The Old

There is an abundance of issues faced by Regis, and the aged care reform outlook is uncertain amid diminished public confidence. Yet the indicative...

David Blennerhassett

Metlifecare: Scheme Sanctioned. Potential Bad Precedent Averted

Logic prevailed, and the Scheme was not derailed by a last-minute opposition. ResIL was ultimately not viewed as being representative of long-term...

David Blennerhassett

Metlifecare: Statutory Vacuum

A small Metlifecare shareholder strongly believes the deal needs to be blocked and has lodged an opposition with the Takeovers Panel. This would...

David Blennerhassett

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