The bitter nature of the dispute between jilted Metlifecare and its foreign suitor emerged today when documents from both parties were posted on the NZX.
Asia Pacific Village Group said the pandemic breakout resulted in Metlifecare's asset value plummeting by more than $200 million, based on long-term cash flows but Metlifecare has rejected the takeover withdrawn and disputing Asia Pacific's claims.
Asia Pacific says it cannot proceed with its planned $1.49b takeover of the business whose shares were trading around $7 before the pandemic but are today trading at $4.20.
But Metlifecare chair Kim Ellis rejected Asia Pacific's "underlying assumption" that the pandemic had caused and will cause serious, widespread and lasting detriment to Metlifecare's business. The five-week lockdown created some immediate practical issues but the virus had not damaged Metlifecare's business or its model, Ellis said.
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On April 23, Ellis wrote to Nathalie Brabers-Jastrow, an Asia Pacific director, saying the suitor's assumptions were that the elderly were particularly vulnerable, that Covid-19 cases had occurred in New Zealand aged care facilities and retirement villages and the pandemic was materially adverse to the business.
But Ellis rejected each underlying assumption by Asia Pacific: "Metlifecare strongly disagrees with your conclusion, which we consider to be overly simplistic. It is not correct to characterise Covid-19 as a pandemic that, in and of itself, will cause widespread harm to either the retirement village sector or Metlifecare."
Asia Pacific also accused Metlifecare of deferring at least $34.6m development, remediation, maintenance and refurbishment work outside of New Zealand's alert level 4 lockdown. Work due before the end of June was being pushed into the next financial year, and 2021 activity is being pushed into 2022, Asia Pacific said.
Ellis said construction work could not take place during the level 4 alert.
Asia Pacific says a material change has occurred since the pandemic outbreak and that Metlifecare's values and outlook were hit by Covid-19.
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Metlifecare had forecast 80 unit sale applications last month but got only 36. It forecast 62 sale applications for April but got only five. And prices were suffering because most of those new applications were at discounted prices, it said. Prospective residents would defer buying for a long time due to the pandemic and its consequences, Asia Pacific said.
But Ellis said while the lockdown had interrupted sales and construction, the restrictions were eased now and could be further eased soon.
"Our construction, remediation and refurbishment and maintenance capex spending has been delayed to some extent by the government-mandated lockdown. Those delays were required by the lockdown laws so cannot constitute any breach," Ellis told Asia Pacific.
Metlifecare was actively advertising and approaching prospective residents and 10 sale settlements were brought forward so people to move pre-lockdown, Ellis said. A further 32 settlements were temporarily delayed but 50 settlements were still expected through till the end of May, Ellis said.
Standalone aged care facilities had clusters of infection but those were not retirement villages, and they operated very differently to Metlifecare, Ellis said.
"They are standalone care facilities, which Metlifecare does not operate. While our business does include some care facilities, they are integrated within retirement villages," Ellis said.
Asia Pacific also took issue with Metlifecare's April 3 application for the government wage subsidy of $7.1m. Metlifecare made the application without Asia Pacific's consent, the suitor said.
Ellis said Metlifecare had not breached any terms of the agreement with Asia Pacific: "Metlifecare does not consider there to be any ground for a valid termination."
Metlifecare's wage subsidiaries were applied for on the same basis as many other applicants, it said today.
"The wage subsidy is a permitted offset to employee wage costs if the group suffers a 30 per cent reduction in revenue - not underlying profit - in any one of three months and must be passed on to employees. Metlifecare subsidiaries suffered the revenue shortfall during the Level 4 lockdown, hence the approval for the subsidies," it said.
The consolidated underlying profit projections for FY20 clearly take the impact of the lockdown into account and assumed Metlifecare subsidiaries would qualify for the wage subsidies.