In October 2013 Sydney-based private equity firm Quadrant purchased 10 Melbourne based Estia Health facilities with 1,100 beds for $175 million. They then build Estia up to 3,900 beds across 39 facilities before floating it at a value of $1 billion 14 months later in December 2014.
Quadrant has since been selling down its shareholding with the final 17% (approx.) sold last week for $5.56 per share, netting approximately $172 million.
Since then the shares have dropped 7% to $5.16. Now hedge fund VGI Partners has come out saying it is ‘shorting’ the stock, in part driving down its value.
At the same time Bank of America Merrill Lynch (BAML) came out with an investor advice that Estia, Japara and Regis Aged Care will all suffer zero earnings growth around 2018-20. BAML had analysed the projected impact of the changed ACFI funding announced in the May budget. All share prices were hit by up to 9%.
Since then UBS and CLSA have come out saying the reverse - now is the time to buy – because demand will continue to exceed supply of aged care beds and additional revenue will be found beyond government funding. With up to 8,000 new beds required every year and less than half that being built, this makes sense.
Getting back to Quadrant, it’s Estia strategy was led by Marcus Darville (pictured at our 2014 LEADERS SUMMIT). He also achieved significant growth – and profit – in NZ when he bought Somerset retirement villages for around $60 million and sold four years later in 2014 for approximately $243M.
