Estia opens books to Bain Capital after private equity group sweetens takeover bid

Bain Capital is keen to acquire ASX-listed aged care provider Estia Health, increasing its takeover bid by 20c a share amid a torrid time for the sector.

ASX-listed aged care provider Estia Health will open its books to Bain Capital after the private group sweetened its offer to take over the company.

Bain is now offering $826.8m or $3.20 per Estia share – up from its $3 bid from March, which was rejected by Estia’s board.

The revised offer sent Estia’s shares soaring more than 13.3 per cent to $2.89 on Wednesday.

“Following careful consideration of the revised proposal the board of Estia Health has determined that it is in the interests of shareholders to progress the revised proposal and allow Bain Capital to undertake further due diligence to enable it to provide a binding proposal,” Estia said.

The company said if Bain followed through with a binding proposal “consistent’ with the revised bid, it would “unanimously” recommend shareholders accept the proposal.

The board’s decision will also be subject to an independent expert concluding the deal is in the best interests of Estia Health shareholders.

The cash offer will be less any dividends declared and paid after the date of the proposal, and is 50 per cent higher than the closing share price on March 21, the day before market speculation around the offer emerged.

It comes amid a torrid time for aged care providers. Seven in 10 nursing homes are operating at a financial loss, while rapidly declining occupancy levels and severe staff shortages are jeopardising the care of hundreds of thousands of vulnerable older residents.

Underlining the financial woes of the sector, nursing homes lost an average $21.29 a bed a day in the September quarter compared to $7.30 in the same quarter of 2021, according to StewartBrown’s latest aged care financial performance survey.

Meanwhile, average occupancy rates have fallen from 95 per cent in 2018 to 91 per cent. The federal government has introduced laws since the aged-care royal commission and its explosive stories of abuse and neglect in the sector.

The commonwealth increased funding $10 a bed day to improve quality and care, costing taxpayers an extra $3.2bn. But the sector is still struggling to stay afloat, prompting smaller providers to court bigger players to consolidate and generate savings by increasing economies of scale.

The challenges were enough for the Kerry Stokes-backed Seven Group to offload its 10 per cent stake in Estia for $2 a share earlier this year.

The sector has faced a wave of consolidation with Catholic healthcare provider Calvary taking over Japara – an aged-care provider formerly listed on the ASX – for $380m two years ago. Meanwhile, BaptistCare combined its east and west coast arms earlier this year in one of the biggest aged-care mergers of the year.