Calvary lifts takeover offer for nursing home provider Japara Healthcare

Catholic private hospital group Calvary has lifted its offer for Japara, saying a takeover will mean better care for residents.

A Japara aged care home in Noosa.

Catholic private hospital operator, Calvary, believes a potential takeover of listed aged care provider Japara Healthcare will lead to better care for the elderly, as it sweetens its offer for the troubled group.

Calvary, officially known as Little Company of Mary Health Care, lifted its takeover bid for Japara by more than 15 per cent to $1.20 a share on Monday, valuing the company at more than $320m.

Japara’s shares surged 5.4 per cent on Monday to close at $1.18.

Calvary chief executive Martin Bowles said merging Japara with Calvary would lead to better care in a sector that a royal commission has exposed damning treatment of the eldery.

“The royal commission into aged care highlighted a genuine need to create a better experience for aged care residents and their families. We believe the combination of the two companies can help achieve that better experience of care while benefiting the residents and employees of both organisations,” Mr Bowles said.

“Our plan is to better serve the people for whom we already care, to offer healing to more people and to be present with people in the times when they are most vulnerable.”

Calvary says its offer is conditional on Japara granting access to its data room and all Japara’s directors voting in favour of the proposal in the absence of a superior offer.

Japara’s board said in a statement to the ASX that it’s “appropriate to offer Calvary due diligence access, subject to agreeing to appropriate conditions and confidentiality arrangements”.

“Shareholders do not need to take any action in relation to the revised indicative proposal and are cautioned there is no certainty that the revised indicative proposal will result in a transaction,” Japara said in the ASX statement.

Calvary - a not-for-profit healthcare provider - lobbed its first offer of $1.04 a share on April 30. Japara said at the time it was yet to form a view on the proposal. Since then, Japara’s shares have climbed from 80c to $1.12.

The company’s performance has fuelled takeover speculation, with its shares hitting a low of 34c last September.

In August last year, Japara wrote down the value of its assets by $219.9m and suspended its final dividend as Covid-19 spread to four of its nursing homes in Melbourne. The non-cash impairment pushed the company deep into the red, swinging from a $16.43m profit in 2019 to a $292.09m loss in the year to June 30 last year.

It is still a far cry from the $1.93 - $1.95 average price Japara’s biggest shareholder, Moelis Australia, paid for its 13.25 per cent holding. Other big shareholders include former chief executive Andrew Sudholz, who spent $2.8m increasing his holding from 5.98 per cent to 8.07 per cent in November last year.

Aurrum Holdings, meanwhile, has a 6.27 per cent stake. It is understood that Aurrum’s director David di Pilla acquired the stake at an average price of 48c a share.

The aged care sector has been in a state of flux, making it difficult to value assets, amid the aged care royal commission and calls for more federal government support.

The government announced an unprecedented $17.7bn aged care reform package last month in response to the damning royal commission findings.

Under the overhaul, an additional 80,000 home care packages will be released to curb the ballooning wait list for support that would allow people to stay at home.

Residential care facilities will also have to deliver an average of 200 care minutes a day per resident.

But Health Services Union national president Gerard Hayes said billions in funding, to be issued over five years, will not change the chronic crisis gripping aged care.

“This barely makes up for the $10bn worth of cuts that have been inflicted over the last eight years,” Mr Hayes said last month.

“For carers, therapists and support workers there is no commitment to permanent, better paid jobs.”