Estia founder Peter Arvanitis quits, dumps $55m stake

Estia Health founder Peter Arvanitis has quit the struggling aged-care provider and dumped his $55m stake.

Peter Arvantis rings the Australian stock exchange bell as Estia floats.

Estia Health founder Peter Arvanitis has quit the struggling aged-care provider and dumped his entire $55 million stake in the company, stoking investor concerns about its outlook.

Mystery surrounds Mr Arvanitis’s shock exit from the company, with his private investment vehicle denying it was linked to a margin call by National Australia Bank.

The colourful former board member is known for his passion for fast cars, which raised some investors’ eyebrows after pictures of his black Ferrari 458 Italia and red Lamborghini Aventador emerged at a time when Estia’s share price was tanking.

The bulk of his Estia stake was held in a private vehicle, Aged Services Victoria. It is understood that Aged Services Victoria’s assets were held as collateral against a loan with National Australia Bank.

Luke Brady, chief executive of Aged Services Victoria, said that, under the agreement with its ­financial institution, which he did not name, the Heritage Lakes Trust — which housed the Estia shares — was part of a broader pool of ­assets under the collateral agreement.

“In the terms and conditions of the agreement the financial institution does not have any ability to sell the Estia equities held in this entity or associated entities,” he said.

NAB declined to comment yesterday, while Mr Arvanitis did not return calls.

Citigroup sold the founder’s stake, which was just under 10 per cent, to a single institutional buyer at $3.15 a share, valuing the sale at about $55m.

Estia’s share price had been sliding over concerns about the viability of its growth strategy and its strong link to government funding.

The company’s shares are down 53 per cent after starting the year at $7.36 and closing yesterday at $3.44.

The Australian understands that Mr Arvanitis’s resignation, only two days after the company revealed in its annual results that it had missed its earnings guidance, surprised Estia’s hierarchy.

Chairman Pat Grier gave no hint of the board’s surprise in his statement yesterday, saying that Mr Arvanitis had resigned as a director to pursue philanthropic and other business interests.

Estia’s shares suffered over the past two months after concerns were raised about the level of government funding the company, which was listed by Quadrant Private Equity in 2014, claimed for high-care-needs residents.

The federal government pays a fixed daily amount per person, with more funding available for residents who are judged to require more attention, using a system known as the aged care funding instrument (ACFI).

Like the vocational training system and childcare before them, greater scrutiny and a sharper eye for budget savings have put the aged-care industry under pressure.

The federal government, faced with a forecast $3.8bn blowout in the cost of the ACFI over four years, announced in the budget it would cut $1.8bn from the funding mechanism.

About 70 per cent of aged-care operators’ revenue is directly government-funded.

Estia chief executive Paul Gregersen declined to estimate the effect of the funding cuts would have on the company but said the changes would be significant in 2018.

Concerns about Estia’s future government funding have been compounded by its reclassification of residents, acquired through its aggressive acquisition growth strategy, to high-care.

According to company filings, 91.3 per cent of its residents were classified high-care members in June last year.

Hedge fund VGI Partners was one of the first to suggest to clients there were problems with Estia’s rapid expansion and growth in per-patient funding. VGI declined to comment yesterday.

In an unrelated share movement, Perpetual increased its stake in Estia from 12.8 per cent to 14.3 per cent after buying shares on Monday at prices between $4.08 and $4.10.