Aged care provider Regis rejects $555m takeover by Soul Pattinson

Aged care group Regis has rejected Soul Pattinson’s $555m takeover bid, revealing Atlassian billionaire Scott Farquhar’s fund had been part of an earlier tilt.

The deal for Regis, one of the nation’s biggest aged care providers, proposes either a cash offer or a share alternative in a newly incorporated company.

Regis Healthcare has rejected a $555m takeover bid from conglomerate Washington H. Soul Pattinson with the aged care provider also revealing billionaire Scott Farquhar’s investment fund teamed up with Soul Patts for an earlier takeover tilt.

Soul Patts and Mr Dorman’s Ashburn, which owns 27.2 per cent of Regis, offered $1.85 a share, a 25 per cent premium to Regis’ closing share price on Thursday of $1.475.

However, Regis said both the $1.85 offer and an earlier $1.65 bid made on September 30 between Soul Patts and Mr Farquhar’s Skip Capital had both been rejected as they undervalued the company given its growth prospects.

Mr Farquhar, a co-founder of tech company Atlassian, is ranked the sixth richest Australian on The List with a fortune of $12.54bn. Skip was not thought to be part of the latest takeover bid which landed Thursday.

Regis shares jumped 22 per cent to $1.80 on Friday morning.

Regis has endured a tough year with the company pointing to challenging industry conditions with public sentiment weakened from the aged care royal commission and its accounts of abuse and neglect.

Still, it pointed to the royal commission outcome due in February 2021 and extra funding for the sector as reasons that could boost its momentum. An easing of Covid-19 may also result in “improving trends in the aged care sector performance”, Regis said.

The $1.85 deal for Regis, one of the nation’s biggest aged care providers, proposes either a cash offer or a share alternative in a newly incorporated company, thereby allowing existing shareholders to retain an exposure to Regis as a privately operated business.

Soul Patts in September revealed it had a $1bn war chest to deploy into equity markets and private equity deals as the COVID-19 pandemic creates market dislocation that is depressing valuations in sectors such as healthcare, tourism and financial services.

Soul Patts chairman Rob Millner said it would seek to open talks with the Regis board, with Credit Suisse its financial adviser on the deal.

Soul Patts “is a patient and long-term investor and is committed to providing access to capital and support to Regis as it navigates through this challenging period and transitions to a new operating environment in the future”, Mr Millner said.

“Given the regulatory uncertainty and funding challenges currently facing the aged care industry, WHSP believes that Regis’ long-term prospects will be best served in a privately owned setting and that WHSP’s long-term investment horizons and access to capital make it and Ashburn logical partners to oversee Regis’ growth and development.”

Private equity firms including TPG Capital were circling Regis earlier this year, sources said.

Soul Patts owns a 44.3 per cent holding in building supplies group Brickworks, 12.6 per cent of TPG Telecom following the merger with Vodafone, a half stake in coal producer New Hope Group and a string of smaller investments including Australian Pharmaceutical Industries and BKI Investment Company.

The conglomerate recorded valuation increases for smaller segments of its portfolio, including its private ­equity division, whose valuation doubled in 2020 to $272m, and its healthcare and pharmaceutical assets, which rose in value by $20m to $285m, although earnings on its healthcare investments fell in the year.

Once the effect of the TPG and Vodafone merger was stripped out from the result, Soul Pattinson said its regular profit in the 12 months to July was down 44.7 per cent at $169.8m, with revenue for the 12 months to the end of July down 15.3 per cent at $1.368bn.