The New Zealand Superannuation Fund has agreed to sell its 19.9 per cent stake in Metlifecare to European private equity firm EQT in a $1.5 billion takeover.

Metlifecare's board signed a scheme implementation agreement with the private equity fund manager and recommended shareholders accept the $7 per share offer valuing the retirement village operator at $1.49 billion.

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The offer was a 50 cent lift from the original bid of $6.50, which the board rejected as being too low after checking with its large institutional shareholders.

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"The board has made it clear for some time that the market has undervalued the company," chair Kim Ellis said in a statement.

The new offer received strong support from a number of institutional shareholders, and the board and executive will vote in favour of the proposal to sell, Metlifecare said.

The shares last traded at $6.38 and have jumped from $5.08 before the unsolicited offer emerged in November. The board suspended a share buyback programme, which they hoped would lift the price given its persistent discount to a net tangible asset value of $6.96.

Among those backing the deal is the NZ Super Fund, which signed a voting deed with EQT entity Asia Pacific Village Group to sell it 42.4 million shares for $296.5 million.

The NZ Super Fund lifted its stake in the retirement village operator in 2013 when it bought 35.7 million shares at $3.53 apiece, or about $126.1m, from FKP Property's Retirement Villages New Zealand.

EQT said other Metlifecare shareholders with 22 per cent of the stock have indicated their support, giving the private equity firm about 42 per cent. A scheme requires 75 per cent support and the support of at least half of all votes cast.

Ken Wong, EQT Partners managing director, said his firm is committed to continue developing and operating retirement villages.

EQT has invested about 61 billion euros since it was founded in 1994 and currently manages about 41 billion euros of assets.

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The transaction is subject to Overseas Investment Office approval, shareholder support and High Court sign-off. It is expected to be completed in May.

Metlifecare's board isn't allowed to shop around for a better offer, but can contemplate a superior bid if one emerges. When updating shareholders on the initial offer earlier this month, Metlifecare said two other parties had expressed an interest in buying the company.

The board's support is subject to the offer price falling within or above the valuation range calculated by an independent adviser. A report is to be prepared ahead of a special meeting scheduled for April.

Metlifecare was advised by Jarden, Simmons Corporate Finance and Chapman Tripp. It said it will appoint an independent adviser soon.

The company didn't comment on whether it will pay an interim dividend. The scheme offer will be reduced by any dividend paid.

If either party backs out of the deal, they face a break fee of $14.9m, or 7 cents per share.

- BusinessDesk