Infratil and the New Zealand Superannuation Fund will buy Australia's fourth-biggest retirement village operator RetireAustralia for A$640.2 million to tap into the ageing demographic across the Tasman.
The Wellington-based infrastructure investor and government pension fund will spend A$429.5 million in cash with the balance funded through existing bank debt on RetireAustralia's balance sheet, they said in a joint statement.
The Australian retirement village operator reported underlying earnings before interest and tax of A$34.3 million in the year ended June 30, and is forecast to report underlying Ebit of A$35 million to $40 million in 2015, giving the deal an earnings multiple of 18.6 times. The transaction is expected to settle on Dec. 31.
"RetireAustralia provides a strong platform in an Australian sector that offers very attractive long-term growth prospects," Infratil chief executive Marko Bogoievski said.
"We have spent a considerable amount of time evaluating the sector in Australia and identified RetireAustralia as a high quality access point given the profile of the assets and the capability of the management team.
"Infratil and the Super Fund bought the downstream assets of Shell New Zealand, rebranding the petrol station chain into Z Energy and later listed the company on the stock market, and more recently jointly took separate cornerstone stakes in local retirement village operator and developer Metlifecare.
The RetireAustralia investment will be managed by Infratil's manager HRL Morrison & Co, which has held an investment mandate with the Super Fund since 2006.
Infratil affirmed its guidance for March 2015 earnings before interest, tax, depreciation, amortisation and fair value adjustments at between $475 million and $500 million, with the transaction increasing forecast net interest to a range of $170 million and $180 million from $165 million to $175 million.
The investment firm said the acquisition will increase its asset allocation to growth infrastructure as it rejigs its portfolio for the next round of long-term returns, with the retirement sector "developing as an emerging line of business for Infratil with significant opportunities to deploy capital in the future."
The sale price includes estimated transaction costs of A$23.5 million. RetireAustraila is currently owned by Morgan Stanley Real Estate Investment and the JP Morgan Global Special Opportunities Group.
Shares of Infratil last traded at $3.03 and have climbed 42 percent this year, outpacing the 17 percent gain in the benchmark NZX 50 Index over the same period.