Regis Healthcare shares gain on $35.5m acquisition
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More news: Shares in Regis Healthcare advanced on the ASX after the group agreed to acquire two residential aged care homes from Ti Tree Operations for a combined $35.5 million.
Regis shares were up 3.4% to $6.03 by 11:15am AEST, having surged more than 120% over the last 12 months.
Regis Healthcare acquires two aged care homes for $35.5m
The news: Regis Healthcare has agreed to buy two residential aged care homes from privately owned Ti Tree Operations for $35.5 million.
The numbers: The two Melbourne-based residential aged care homes in Capel Sound and Mornington have a combined 262 beds, and operate under the trading name Village Glen.
The acquisition will see Regis' aged care portfolio increase to 68 homes with approximately 7,660 beds. This figure will grow when Regis opens the new 112-bed greenfield residential aged care home in Camberwell, Victoria to new residents later this year.
Village Glen Mornington was opened in 2018 and Village Glen Capel Sound was opened in 2014. Regis said both homes are fully accredited and have a "strong reputation in the market" with average occupancy of 96% in Q4 FY24.
The refundable accommodation deposit (RAD) assumed at settlement is expected to be around $68 million, the company said, and the net consideration represents a "high single digit" multiple of pro-forma annualised EBITDA or approximately $135,000 per bed.
The context: The transaction, which is subject to regulatory approvals, is expected to settle on 2 December and will be funded by Regis' existing cash.
Regis said there will be potential cost savings, including procurement and reduced corporate costs, with the acquisition expected to be earnings per share accretive in FY25.
The aged care services provider also said it welcomed bipartisan agreement on "historic funding reforms" in the aged care sector.
Regis shares rose last week after Labor struck a deal with the Coalition to introduce the new reforms.
Under the proposed measures, aged care providers like Regis will be able to retain 2% of a resident's RAD for up to five years. Jarden analysts said this reform measure could help Regis bring in around $27.5 million of additional income within three years, or an anticipated 18% increase in EBITDA in FY28/29.
Regis said the expected changes will improve returns for the aged care sectors and enable providers to invest in further greenfield aged care developments.
What they said: "After many years of chronic underfunding with a significant portion of the sector operating at a loss, we are now expecting more predictable and sustainable funding to invest in high-quality services and aged care homes that Australians expect" Regis CEO Linda Mellors said.
"Regis is pleased that the government and opposition have cooperated to progress critical aged care reforms," she said. "As a result, Regis will now commence three greenfield developments in FY25, which will add 323 high quality beds to the portfolio."
The source: ASX announcement
