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Aveo still in discussions with Brookfield on $1.27 billion cash offer
By simon johanson
Brookfield Asset Management is putting a value of $1.27 billion in cash on its takeover target, embattled retirement living operator Aveo Group.
The disclosure, made on Tuesday by Aveo, is the first time a value has been put on the offer since it was first revealed nearly a month ago the retirement operator and the Canadian firm were in talks.
Aveo's acquisition would give Brookfield a sizeable chunk of Australia's aged care industry.
"In response to price speculation, Aveo notes that the indicative cash offer price currently under discussion with Brookfield is $2.195 cash for each Aveo stapled security," Aveo said.
Brookfield's proposal represents a 8.1 per cent premium to closing share price on Monday.
Aveo's management continued to caution a deal was yet to be finalised and said, if agreement was reached, Brookfield's offer would be reduced by any subsequent distributions, including a 4.5¢ distribution announced on 24 June.
Aveo's acquisition would give Brookfield a sizeable chunk of Australia's aged-care industry, which has seen its valuations slide to attractive levels in the wake of a public inquiry into mistreatment and abuse of residents in aged-care facilities.
Aveo revealed in June that the property downturn had hit its earnings and warned underlying profits would fall to $50 million. It cut its annual distribution to unit holders in half.
Settlements are taking longer as incoming residents experience increased difficulty in selling their homes to move on, creating the knock-on effect of delaying decisions to purchase in Aveo’s villages, it said.
The group’s sales took a dive after a joint investigation by The Age and Herald in conjunction with ABC's 4 Corners exposed a litany of questionable business practices, including churning of residents, fee-gouging, safety issues and misleading marketing promises.
Aveo shares have fallen around 12 per cent over the past year and closed down 8¢, or 3.9 per cent, at $1.95.
Merrill Lynch and Herbert Smith Freehills are advising Aveo on the deal.