Pacific Equity Partners adds $3bn Aveo to shopping list

Aveo’s retirement living facility at Springfield in Brisbane.

First it was RetireAustralia, then aged-care provider Opal.

Now Pacific Equity Partners has a new target in the retirement living space: Aveo.

On Monday, Canadian private equity firm Brookfield fired the starter’s gun on a sale process for the $3bn-plus business Aveo that it owns, opening a data room for prospective suitors and issuing an information memorandum.

Parties can come back to Brookfield with an indication of what they would be prepared to pay by mid-December.

The understanding is that Sydney-based PEP is lining up to take a look, and said to be very interested.

In recent months PEP ran the ruler over Aveo’s rival, RetireAustralia.

However, the understanding is that it was only prepared to pay about 25 per cent below the asking price and never followed through on a deal.

Now it is carrying out exclusive due diligence to buy half of aged-care provider Opal; the 50 per cent stake is estimated to be worth about $1bn, or $500m excluding debt.

The general view is that PEP is likely to buy Aveo or Opal but not both.

Most think that Opal would be more to its liking, with more opportunities for an exit by way of a sale to another trade player or an initial public offering.

The promotion of the business started earlier in the year with a flyer issued, and advisers from Barrenjoey and Morgan Stanley reached out to prospective buyers.

Brookfield purchased the then listed Aveo in 2019 for $1.3bn, or $2bn including debt.

Aveo, which operates retirement villages on the east coast, is eyeing infrastructure funds as prospective buyers.

This could include groups like Stonepeak and EQT, and Keyton – owned by Aware Super, APG and Lendlease.

Aveo has a deferred management fee model where income is back-ended, and infrastructure companies are more willing to underwrite the annuity of the cash flows over time.

Established in 1970, Aveo has 86 retirement facilities along the eastern seaboard, including independent living units and serviced apartments.

It has 4 per cent market share, ahead of Lendlease with 1.9 per cent and Bolton Clarke with 1 per cent, according to IBISWorld.