Canadian investment giant Brookfield looks set to acquire aged care operator Aveo Group in a deal worth $1.27 billion.
In a note to the ASX on Wednesday, Aveo announced that it had entered a scheme agreement with entities controlled by Brookfield, valuing Aveo at $2.195 a share.
The cash consideration represents a 28 per cent premium on the group’s last closing price prior to Aveo announcing that it had received a number of bids from interested parties in February.
Under the terms of the scheme arrangement, Aveo shareholders can take the cash or opt for a scrip alternative— “stub equity”—giving shareholders a vehicle for future investment in the retirement village operator.
Both options factor in Aveo’s planned annual distribution of 4.5 cents a security, while the scrip alternative will only be available for up to 30 per cent of securities with scale back provisions if scrip elections exceed 30 per cent.
At least 10 per cent of Aveo security holders will need to apply for the scrip provision for it to go ahead.
Brookfield’s buy-out has been unanimously recommended by the full Aveo board and is not subject to financing or due diligence.
“Having completed the [strategic review] process, the independent board committee and the full Aveo board have unanimously concluded that in light of Aveo’s short-to-medium term outlook the Brookfield transaction is in the best interests of our securityholders,” Aveo told investors.
Aveo’s current market capitalisation is $1.17 billion with an enterprise value of $2 billion. The Brookfield bid values Aveo’s equity at $1.3 billion.
The deal is subject to Malaysian investor Mulpha Group’s support of the Brookfield bid. Directors of the major Aveo shareholder—Mulpha owns a 24.4 per cent stake in Aveo—have indicated they intend to recommend Brookfield’s bid to Mulpha’s parent company.
“Should Mulpha inform Aveo of its voting intentions, Aveo will update the market accordingly,” Aveo said.
Aveo’s full year results are due August 28. The group’s share price took a hit in June after it more than halved its underlying profit from $127.2 million to $50 million, blaming a deteriorating residential property market and settlement uncertainty.
Aveo shares closed out nearly 6 per cent higher on Wednesday at $2.12.