Japara is engaging with Calvary over its bid, but thinks things could change with the response to the aged care royal commission.
Japara is engaging with Calvary over its bid, but thinks things could change with the response to the aged care royal commission.

Japara considers $278m takeover offer

A Catholic healthcare provider has lobbed a $278m, unsolicited takeover offer to troubled aged care outfit Japara Healthcare.

Little Company of Mary Health Care, otherwise known as Calvary, has made a bid of $1.04 a share, representing a premium of 30 per cent from Thursday's share market close.

Japara is engaging with Calvary, retaining Macquarie Capital and Herbert Smith Freehills as advisers, but has recommended shareholders do nothing at this stage.

While Japara's board is yet to form a view on the proposal, it said the value of the company is difficult to determine fully before the aged care royal commission releases its final report, and pending aged care funding boosts in the upcoming federal budget.

"The Japara board has not yet formed a view on the merits of the indicative proposal and is currently considering it in the context of, amongst other things, expected improvements in trading conditions and the federal government's upcoming budget and regulatory response to the Royal Commission into Aged Care Quality and Safety recommendations expected in May 2021," the company said in an ASX announcement.

"The indicative cash price offered to shareholders under the indicative proposal is $1.04 per share. The offer price assumes no further dividends, distributions or reductions in capital would be paid from the date of the indicative proposal and that there are no material changes to the business from the position disclosed to the ASX

"The indicative proposal is subject to a number of conditions, including completion of due diligence, negotiation and execution of a binding scheme implementation agreement and a unanimous recommendation by the Japara board."

Last August, Japara wrote down the value of its assets by $219.9m and suspended its final dividend as COVID-19 spread to four of its nursing homes in Melbourne. The non-cash impairment pushed the company deep into the red, swinging from a $16.43m profit in 2019 to a $292.09m loss in the year to June 30, 2020.

The company's performance has fuelled takeover speculation, with its share price doubling to 80c since last November.

It is still a far cry from the $1.93 -$1.95 average price Japara's biggest shareholder, Moelis Australia, purchased its 13.25 per cent holding for. Other big shareholders include former chief executive Andrew Sudholz, who spent $2.8m increased his holding from 5.98 to 8.07 per cent last November.

Aurrum Holdings meanwhile has a 6.27 per cent stake. It is understood Aurrum's director David di Pilla acquired the stake at an average price of 48c.

The takeover offer comes almost three weeks after aged care providers and consumer groups called on the Morrison government to use the May budget to finally fix the crisis-riddled sector, saying older Australians will no longer cop "fiddling at the edges" of reform.

Peak provider organisations and advocacy groups representing the nation's seniors have supported a raft of key changes needed to lift the standard of aged care, including a better paid, more highly trained workforce and new laws to enshrine high quality aged care as a basic right.

But both groups are concerned the government, which is using the budget to deliver its comprehensive response to the aged care royal commission's final report, will cherry pick from its 148 recommendations and fall short of a much-needed system-wide overhaul.

Originally published as Japara considers $278m takeover offer

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