Soul Patts looks to sweeten its offer for Regis

Will Washington H. Soul Pattinson return to the negotiating table for listed aged-care provider Regis Healthcare?. Picture: Supplied.

Washington H. Soul Pattinson is understood to be returning to the negotiating table with a higher offer for listed aged-care provider Regis Healthcare.

It is understood that Soul Patts has plans to sweeten its last bid of $1.85 a share that valued the business at $556m.

That bid was rejected by the Regis board last week.

Regis was co-founded by Bryan Dorman and Ian Roberts, who collectively own about 54 per cent of the business.

Soul Patts, which is working with its own advisory firm, Pitt Capital Partners, and Credit Suisse, made its bid — a 25 per cent premium to the previous closing price of $1.475 — last week with Mr Dorman.

The conglomerate has been circling the company since the onslaught of the COVID-19 pandemic that resulted in Regis’s share price fall to about 70c.

It initially offered $1.65 a share on September 30, teaming up with Skip Capital, the company of billionaire Atlassian co-founder Scott Farquhar.

Soul Patts has grown interested in the aged-care industry after earlier partnering with the Moran Health Care Group to development retirement facilities.

Among its investments are 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 and a string of smaller investments including Australian Pharmaceutical Industries and BKI Investment Company.

New Hope is under pressure from a falling coal price and negative sentiment about the commodity from investors and financiers due to concerns about its impact on the environment.

Some consider this was a motivating factor for Soul Patts to further diversify its portfolio.

New Hope was earlier understood to have held talks with Whitehaven Coal about a merger, but it is thought Whitehaven dismissed such a proposal.

Private equity firms and industry players have been sizing up opportunities in the listed aged-care sector this year, with groups such as TPG Capital, Centuria and David Di Pilla’s Aurrum Aged Care understood to have been circling targets.

Regis, advised by Flagstaff Partners, is especially attractive to a wide range of parties due to the properties it owns in its portfolio.

Aurrum recently lifted its interest in listed rival Japara to about 6 per cent, but the company’s chief executive, Andrew Sudholz, also increased his interest to 8.2 per cent.

Aged-care companies have been hard hit by higher costs linked to the COVID-19 pandemic.

While the companies have been trading at below their replacement cost, many suitors have been eager to wait until the government makes decisions around funding following a royal commission into the sector examining claims of abuse and neglect before making a move.

The royal commission outcome is due in February and Regis believes additional funding may boost momentum.

Soul Patts believes that a privatisation would be the best outcome for the company given the challenges affecting the industry.

Private equity firms are attracted to aged-care operators due to their high cashflows, in a similar way to other assets such as theme parks, which prompted Pacific Equity Partners and BGH Capital to battle for Village Roadshow earlier this year.