A Swedish-based private equity firm is a step closer in its attempt to buy one of New Zealand's biggest retirement businesses having passed a key regulatory hurdle.

Metlifecare, with a $1.2 billion market capitalisation, told shareholders today that Overseas Investment Office approval had been granted for Asia Pacific Village Group to buy 100 per cent of its shares.

APVG is owned by Swedish-based private equity firm EQT Infrastructure IV.

But some in the investment community are still smarting at the takeover price, lowered from around $1.49b late last year to $1.27b when Covid hit, with cornerstone shareholder the NZ Super Fund backing that lower priced $6/share offer.


Shareholders are due to meet in a virtual forum on October 2 amid bitterness behind the scenes over the lower price, with chairman Kim Ellis not supporting the takeover at that price.

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Asia Pacific is paying $6/share even though independent advisers Calibre Partners assessed the value, including a premium for control, to be $5.80 to $6.90.

Today, Metlifecare welcomed OIO approval.

"APVG's receipt of OIO consent is an important step in progressing APVG's proposed acquisition of Metlifecare by way of a scheme of arrangement," the company said.

"Following receipt of the consent, the remaining key conditions are the approval of the scheme by Metlifecare's shareholders and approval by the High Court. If the remaining conditions of the scheme are satisfied, the acquisition is expected to complete on October 29."

But some close to the deal are asking why investors did not battle for a higher price, particularly with New Zealand's residential market not falling to the extent economist were predicting in March.

In fact, one expert predicts an annual 6.3 per cent rise this year and 8 per cent next year.


Today, Westpac chief economist Dominick Stephens said the housing market had "shot the lights out", far exceeding the forecast his team had made when Covid first broke out.

"House prices have been boosted by a big drop in mortgage rates. Also, the adverse economic impact of Covid-19 has proven much less severe than anticipated. Today we are upgrading our house price forecasts. We now expect a 3.5 per cent increase in house prices between March and December 2020. That will mean 6.3 per cent annual house price inflation for 2020," Stephens said in the latest Home Truths.

House prices will increase 8 per cent next year, he has forecast.

"At some point in the future interest rates will rise. When that happens the process driving house prices higher today will go into reverse, and house prices will fall," Stephens said today.

With retirement village sales being pegged so closely to house prices and movements in the residential market, opponents of Metlifecare's takeover at the lowered price are asking "why?"

A majority of Metlifecare directors back the deal: Chris Aiken, Mark Binns, Alistair Ryan and Rod Snodgrass recommend shareholders vote in favour of it.


But chairman Kim Ellis has made his support for a higher price well known. He has said the lower-priced takeover was a fait accompli when the largest shareholder - the Super Fund - left no opportunity for the board to use litigation to negotiate the offer price up to the $6.35 valuation midpoint of the earlier independent adviser's report.

He considers Metlifecare's strong litigation position was displayed in the FY20 underlying profit and NTA results announced when the company declared its full-year result on August 26.

For the takeover scheme to succeed, more than 75 per cent of the votes cast and more than 50 per cent of the total number of Metlifecare shares on issue must be voted in favour.

Last month, Metlifecare accounts showed property revaluations reflecting valuer caution due to Covid-19's economic impact resulted in a bottom-line loss of $33.7m for the June year, compared to a $51.2m profit in 2019.

Revenue rose 7.7 per cent from last year's $124.5m to $134.1m.

"The net loss after tax largely reflected changes in the valuer's assessment of the value of investment properties to reflect the projected economic impact of Covid-19," the business said on August 26.


The fair value movement of investment property rose $53.9m last year but this year fell $74.8m.

Metlifecare shares have been trading at nearly $6, up from $4.20 in April when the first lockdown was in action in New Zealand.