New York-headquartered private equity investor Stonepeak has made a shock $2b offer for Arvida Group
Takeover is subject to shareholder, High Court and Overseas Investment Office acceptance or clearance
Board has recommended shareholders accept the $1.70/share price offered
Today’s sudden announcement of a $2 billion takeover offer by US$71b New York-headquartered private equity investor Stonepeak for retirement giant Arvida Group is no surprise to one fund manager who says the sector’s NZX share prices have been “overly discounted” compared to their underlying value.
Shane Solly, a director of Harbour Asset Management, its portfolio manager and research analyst, 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, he indicated. Solly said Harbour owns shares in Arvida so he was reluctant to talk specifically about today’s offer announcement.
“The retirement village sector has been penalised in the face of rapid increases in interest rates in the last 12 to 18 months and people are looking at that discount,” he said of low trading prices on stocks and how investors were viewing that.
Arvida shares this morning shot up 52 per cent to $1.57, close to the offer price.
Solly said retirement village stocks had been some of the weaker performing parts of the New Zealand market lately “and for the reasons we all know about because it’s taking longer to sell homes and move in”.
Arvida Group was trading at just $1.03 on Friday, July 19, 2024 before the takeover announcement. Image / NZX
By just after 10am, Ryman Healthcare was trading around $4.41, down 35 per cent annually. Oceania Healthcare was trading at 71c, down 5.3 per cent while Summerset Group is the least discounted, trading down only 4 per cent around $10.15.
Matt Goodson, managing director and portfolio manager at Salt Funds, said the market was repricing all retirement village stocks today, given the takeover offer.
Arvida’s share price movement suggested the takeover was a surprise, Goodson said, predicting the takeover would go ahead at the price offered.
Salt doesn’t own Arvida shares but has other holdings in the sector, Goodson said.
“I’d be surprised if this didn’t go through. This offer reflects a disconnect between the purchaser’s view of the NTA and the market’s previous view of the NTA. What’s surprising is the willingness of a private equity business to pay such a sizeable premium,” Goodson said, comparing it to the Metlifecare takeover.
“One might take the view that this is the bottom of the housing market and that might be correct as interest rates fall.”
Arvida’s board chaired by Anthony Beverley has unanimously recommended shareholders accept Stonepeak’s $1.70/share offer.
The deal for the company whose boss is Jeremy Nicoll is valued at US$1.25b or NZ$2b.
Jeremy Nicoll, Arvida chief executive. Photo / Dean Purcell
The board said it was compelling value and a material premium.
Arvida’s latest financial summary showed it has performed particularly strongly. Although it declared $4.2b of assets, its market capitalisation on the NZX is only $1.16b.
The company has 730,985,104 shares trading on the NZX.
Net profit was up 69% from $82m in 2023 to $139m in 2024. The asset base grew in value by 12% from $3.8b to $4.2b. Ebitda rose 14% from $84m to $95m yet the share price continued to fall, down 19% annually and trading at only $1.03 on Friday.
Solly said retirement stocks had been “overly discounted” and recovery of their prices would take some time.
Asked about the potential loss of another NZX retirement stock after Metlifecare a few years ago, Solly said that was most certainly a risk to the New Zealand market.
And it wasn’t just retirement stocks which were affected, he said, citing Sir Stephen Tindall’s tilt at the listed The Warehouse today as well.
“So a range of businesses are at risk of no longer being on the market.”
However, this was one cycle which could see stock lost but equally he is optimistic about an economic recovery and a different form of activity taking place then.
Some of Arvida’s largest investors are Forsyth Barr with around 9.9%, ACC with 7.2% and Milford Asset Management with around 5.3%.
Stonepeak’s offer is subject to shareholder, High Court and Overseas Investment Office approval.
Last December, Arvida said it knew of a market rumour that it had an acquisition approach but was not considering it.
“Arvida confirms that in September 2023 an offshore infrastructure fund approached Arvida on a confidential basis with a highly conditional unsolicited non-binding proposal for the acquisition of all of its shares, which the suitor indicated it would prefer to implement through a negotiated scheme of arrangement,” the December 14 announcement said.
The board had taken independent legal and financial advice and decided not to engage with the proposal on the basis that $1.70/share was not in shareholders’ best interests, the company said last year.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
