Aussie in $300m aged care takeover

Australian healthcare company DCA Group is to buy New Zealand's largest private resthome and hospital owner, Guardian Healthcare - and growth is top of its Kiwi agenda.

ASX-listed DCA will acquire 2163 aged care beds and 379 units and apartments for $300 million (A$270 million) under the purchase agreement with Guardian's Australian majority owner, Pacific Equity Partners, and management stakeholders, including founder David Renwick.

PEP, an investment company, bought around 90 per cent of Guardian just eight months ago for $110 million. The balance is owned by Renwick and senior executives. It went from being a public unlisted company to a private company.

DCA managing director David Vaux said from Sydney the much higher price his company was willing to pay reflected Guardian's expansion since last year, the quality of the company and its management, and improvements in Government subsidies for residential care.

"Over the last year the New Zealand industry outlook has firmed up substantially. The Government improved the funding [last year] and in the recent Budget there were announcements about a further $71 million being invested into the industry," Vaux said.

"At the same time the Government announced that income and asset tests were to be relaxed substantially, the impact of which will be a likely increase in industry occupancy of about five per cent, which will also flow through to Guardian."

An independent report at the time said PEP's offer put Guardian's enterprise value - the combination of equity and debt - at $176.2 million.

DCA said Guardian's revenue for the year to June 30, 2006, on a pro-forma basis, was expected to be around $103.4 million. Earnings before interest, tax, depreciation and amortisation were expected to be $28.7 million.

The latest available financial results for Guardian are for the 2004 year. It reported a bottom-line profit of $5.6 million on revenue of $58.2 million. It was then forecasting $7.8 million and $78.7 million for this year.

DCA's Australian policy is to expand by at least 500 beds a year.

Vaux said he expected its rate of expansion on this side of the Tasman to be "in excess of that over the next couple of years".

Renwick, Guardian's managing director, will stay in the job along with his management team. He said he was negotiating an equity stake in DCA.

Asked about expansion plans, Renwick said "one or two" acquisitions were under negotiation.

DCA, which posted an after-tax profit of A$32.1 million last year, is also Australia's biggest radiology company. Asked if DCA would use Guardian as an entry to that sector in New Zealand, Vaux said: "It's not on our agenda right now but I'm not going to rule it out either."

The sale, which needs Overseas Investment Commission approval, should be completed in two months.

DCA's share price rose 25Ac to A$3.93 after the announcement.

Shuffling assets

Guardian Healthcare

Formerly Harbourside Investments
32 facilities
Medical alarm market leader
Price tag $300 million

DCA

ASX listed
Will have 5700 aged care beds
Will have 69 transtasman sites

PEP

Aussie investment company
Bought Guardian 8 months ago
Paid $110 million