There is talk in the market that a private aged-care provider is soon to hit the block and some are pointing to the Melbourne-based Blue Cross owned by the Eccles family. Blue Cross has 32 residences across Victoria.
Sources say the group has recently approached private equity firms with the opportunity to buy a minority stake in the business and has been in search of a party prepared to offer an equity injection.
Some estimate the business could be worth between $600m and $800m.
Should Blue Cross come to market, private equity firms would be keen to acquire it if they could secure the entire business and operational control.
Despite challenges during the pandemic in keeping COVID-19 out of aged-care facilities and finding the right staff to provide services, the sector is now set to be back in favour with buyers.
The industry was a strong funding recipient from the recent federal budget, although sources say there are higher expectations on aged-care operators in terms of the services provided following the outcome of a royal commission into the industry.
The federal government offered a $17.7 billion funding boost to help the struggling sector which will go towards measures including home care packages, training for aged-care workers and the creation of a new Aged Care Act.
Some of the major global buyout funds that have been interested in acquiring assets in the space include TPG Capital, Carlyle and Kohlberg Kravis Roberts. European buyout fund EQT could also show some interest.
Before the royal commission into aged care in 2018, EQT was in discussions with Archer Capital about buying its aged-care provider Allity, which many suspect is soon to hit the block.
The other keen acquirer of assets in the sector is former UBS banker David Di Pilla, who has the privately held Aurrum Aged Care business and floated real estate manager Home Consortium.
It is also worth remembering that the conglomerate Washington H. Soul Pattinson made a play for the listed Regis Healthcare last year, although its $556 million buyout proposal was rebuffed.
TPG Capital had also been looking at Regis earlier.
Not-for-profit Catholic healthcare provider Calvary also made a $278m acquisition proposal in April for Japara Healthcare, equating to $1.04 per share.
At the time, Japara told shareholders to take no action. Japara’s shares on Friday closed at $1.11.
Working with Japara is Macquarie Capital and law firm Herbert Smith Freehills.
Other companies are expected to be targets for buyers at a time that valuations for aged-care businesses remain subdued from their levels five years ago.
These include the listed Estia Health, while the non-listed AMP Capital-owned Opal Aged Care could also be a divestment candidate.
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