Estia extends aged-care merger hunt to premium player Regis Healthcare

Opal has 142 residential aged-care homes throughout Australia while Estia operates more than 90.

It turns out it’s not just Pacific Equity Partners and its aged-care business Opal that Estia has approached about a merger deal.

DataRoom understands that Estia’s owner, Bain Capital, or its advisers, had also reached out to market darling Regis Healthcare about a tie-up.

Regis Healthcare is advised by Macquarie Capital and it comes as sources in the market suggest that the healthcare operator has been weighing a major deal in the past six months.

The Australian-listed Regis, which has a $2.25bn market valuation, is considered best in class when it comes to aged-care operators as it has a portfolio positioned at the premium end of the market.

Whether the Linda Mellors-run business would seek to expand through acquisition into different market segments is another consideration.

But powerful earnings benefits can come with portfolio scale and diversity.

Regis did not comment about the speculation.

PEP spent about $1bn last year buying a 50 per cent stake in Opal – considered a high quality aged-care business, and the other owner is GK Goh based in Singapore.

Merging with Estia would create a major aged-care player in Australia that, if listed, would attract passive index funds which are compelled to buy into a stock once it reaches a certain scale.

Sources say that if the merger were to occur, Bain Capital and PEP would likely need about a year to integrate the two businesses but could then consider a listing after that time.

Such a move would create liquidity and the opportunity for existing investors in Opal to stage an exit.

Regis Healthcare chief Linda Mellors.

DataRoom revealed in October that Estia had hired investment banks Barrenjoey and Gresham for a potential sale or listing of the $1bn-plus business.

Boston-based Bain Capital purchased Estia, which was listed on the Australian Securities Exchange, for $838m in 2023.

Bringing Opal and Estia together also would create major synergies.

PEP purchased its stake from Dexus, which inherited its stake as part of its purchase of AMP Capital.

Opal has 142 residential aged-care homes throughout Australia and caters for more than 13,000 residents.

Estia operates more than 90 homes throughout Australia and cares for more than 10,000 residents. The business was listed on the ASX by Quadrant Private Equity in 2014.

Meanwhile, Regis has 68 aged-care homes throughout Australia catering to 7246 residents.

It also has 422 retirement living residents and 2578 home care clients.

Its share price is now about $7.50 and its market value is $2.3bn after the share price slumped to as low as $1.46 in 2023.

Any decision about acquisitions in the aged-care space may come down to the views of its founding shareholders, including Ian Roberts who owns 27 per cent, and Bryan Dorman who owns just over 10 per cent and has been selling down his holding.