Daily Brief Australia: Estia Health, Redox, Empire Energy, Respiri Ltd and more

• Estia Health (EHE AU) has received a revised non-binding indicative proposal from Bain Capital at A$3.20 per share, a 6.7% premium to the previously rejected offer of A$3.00 per share.
• The revised offer is attractive in comparison to historical share prices and multiples. The offer is also attractive in comparison to the Japara Healthcare (JHC AU) precedent transaction.   
• Bain has been granted exclusive due diligence. Bain’s reengagement suggests a committed bidder. Expect a binding offer. At the last close, the gross spread is 10.3%.

• On the 23 March, aged care provider Estia Health (EHE AU) announced Bain Capital’s $3.00/share non-binding proposal. 12 days later, Estia rejected this indicative Offer. 
• Bain has returned with a A$3.20/share proposal, inclusive of a fully franked dividend up to A$0.12/share. A process deed has been entered into, and exclusive due diligence has been granted. 
• Trading at a gross spread of 10.7% with an indicative completion in early 4Q23.

• Redox (RDX AU), a chemical and ingredients distributor, is looking to raise around US$270m in its Australia IPO. 
• In 2022 it was ranked as the largest chemicals and ingredients distributor in Australia, as well as the 13th largest in the Asia Pacific region and the 35th largest worldwide.
• In this note, we will look at the company’s past performance.

Respiri’s recent investor presentation recapped management’s strategic rationale for and the merits of the company’s proposed acquisition of Access Managed Services, its US remote patient monitoring (RPM) and chronic care management partner. We maintain that the acquisition will provide further impetus to Respiri’s US commercialisation plans for wheezo, diversify the company’s operations and expand the addressable market. Importantly, the post-acquisition RPM monthly annuity will rise to US$70–100 from US$10–20 per patient, allowing break-even to be reached at 9,000 patients (by end-CY24) versus 30,000 patients previously, a target we see as more achievable. The decision to pay out the US$3m deal consideration over three milestone-linked tranches is also sound, tempering the financing risk, in our opinion. We will present our revised estimates and valuation following the deal closure, which we expect by early July 2023.