Soul Pattinson keeps door open to tech billionaire Scott Farquhar for Regis

Conglomerate Soul Pattinson has kept the door open to tech billionaire Scott Farquhar joining its $555m takeover bid for aged care provider Regis Healthcare.

Conglomerate Soul Pattinson has kept the door open to tech billionaire Scott Farquhar. Picture: Justin Lloyd.

Conglomerate Soul Pattinson has kept the door open to tech billionaire Scott Farquhar joining its $555m takeover bid for aged care provider Regis Healthcare.

Regis on Friday rejected an $1.85 a share offer from Soul Patts and Regis co-founder Bryan Dorman, while also revealing Soul Patts had previously lobbed a separate $1.65 a share bid with Mr Farquhar’s investment fund Skip Capital, headed up by his wife Kim Jackson.

Regis shares jumped 23 per cent to $1.82 on Friday.

While Mr Farquhar is not part of the current bid, it’s understood his Skip investment vehicle may again link up with a combined takeover offer by Soul Patts and Mr Dorman should it ultimately progress.

Sources said Skip’s involvement would be dependent on any takeover offer operating via a scheme of arrangement rather than a hostile deal, underlining its preference to remain out of the spotlight.

“We have identified a minority private financial investor who may join the consortium prior to announcement of a definitive transaction,” Soul Patts said, referring to Skip Capital.

“Our revised proposal is not conditional on their participation,” Soul Patts chairman Rob Millner and Mr Dorman said in a letter sent on Thursday to Regis chairman Graham Hodges.

Private equity group TPG Capital has previously been weighing up its own takeover tilt for Regis but failed to gain traction with its two largest shareholders and co-founders: Mr Dorman and Ian Roberts who both own a 27 per cent stake in the company.

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.

A string of brokers lifted their Regis price targets, with Jefferies upping its to $1.85 from $1.25 and noting Mr Roberts could block the offer amid speculation other bidders may join the fray.

“In the past week we have seen an increase in substantial holdings in Japara Healthcare, suggesting others consider the current environment a good time to invest,” the broker noted.

“The two founders of Regis each control 27.23 per cent of shares so this bid could be blocked by the other co-founder Ian Roberts. At the same time, it seems unlikely that another bidder would gain approval given a scheme of arrangement requires 75 per cent of votes cast to pass the proposal.”

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

Regis has endured a tough year, with the company pointing earlier this year 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.

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.