Swedish private equity firm EQT has withdrawn its offer to acquire New Zealand retirement village owner and operator Metlifecare for around NZ$1.5 billion ($911.5 million; €835.4 million) due to the negative impact of covid-19.
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The scheme implementation agreement – entered into between a bidder and target, under which the target agrees to propose a scheme to its shareholders – was due to be voted on at a Metlifecare shareholders’ meeting this month and to be implemented in May.
EQT was to acquire 100 percent of Metlifecare through Asia Pacific Village Group, a portfolio company of EQT Infrastructure Fund IV.
Last week, APVG issued a notice to Metlifecare that it intends to terminate the agreement citing “circumstances” that enable it to do so.
Those circumstances, according to EQT’s statement, are that covid-19 has reduced or is likely to reduce Metlifecare’s consolidated net tangible assets by at least NZ$100 million; and/or the pandemic is likely to reduce Metlifecare’s consolidated underlying net profits by at least 10 percent in FY2020, FY2021 and/or future years; and/or the New Zealand company has failed to comply with its obligations under the agreement to carry on Metlifecare’s business in the ordinary course and in the same manner as conducted in the 12 months before the agreement was signed.
APVG stated if the circumstances could not be remedied within 10 business days, it would terminate the agreement within the following five business days. EQT and Metlifecare declined to comment beyond their respective statements.
Metlifecare was established in 1984 and owns and operates a portfolio of 25 retirement villages across New Zealand, housing more than 5,600 residents. The firm said its villages are in areas with strong local economies, supportive demographics and high median house prices, predominantly in the country’s upper North Island. As of 30 June 2019, Metlifecare’s net tangible assets were NZ$1.5 billion and underlying net profits were NZ$39.2 million according to the company’s latest annual financial statement released last year.
In a statement filed with the New Zealand Stock Exchange, Metlifecare said it is seeking legal advice on the APVG notice, and that its initial view is that APVG’s assertions are without substance and its decision to terminate the agreement without a lawful basis.
Last year, EQT agreed to buy 100 percent of Metlifecare at NZ$7 per share, representing a 67 percent premium to the company’s 52-week trading low and a 38 percent premium to the closing price prior to the announcement of the initial offer, the New Zealand company noted in a media release.
Launched in 2018, EQT Infrastructure IV closed on €9.1 billion in March 2019.
In February, EQT said it was exploring options to expand its fourth infrastructure fund.
“Given the pace of investments in EQT Infrastructure IV, work has been initiated to ensure that sufficient capital is available for EQT Infrastructure IV to continue to make investments, either by bridging or extending the existing fund or by using the secondary market,” the Swedish firm said in a statement at the time.
The announcement came on the heels of its seventh investment through fund IV, which was the acquisition of German fibre broadband group Deutsche Glasfaser, in partnership with Canadian pension fund OMERS.
Last month, it completed the buyout of US-based communications provider Zayo Group in a joint deal with Digital Colony worth $14.3 billion.