Jul 26, 2021

Is the takeover battle for Australia’s 5th largest aged care provider about to end?

Elderly person's hand aged care home

At the end of April, not-for-profit aged care provider Calvary, which is formally known as Little Company of Mary Health Care Ltd, made an offer of $1.04 per share for Japara, valuing the company at $278 million. 

Calvary soon afterwards increased its offer for Japara to $1.20 per share, but within days was outdone by Bolton Clarke which offered $1.22 per share, valuing Japara at more than $320 million.

A third bidder was said to be in the wings, but an offer never eventuated.

Both Bolton Clarke and Calvary are now conducting ‘due diligence’ on the provider, and the matter is expected to be resolved this week, according to a report in The Australian.

Japara is currently home to around 4,000 residents and operates 50 aged care homes in eastern Australia. It also has five retirement villages adjacent to its aged care homes, containing 180 apartments.

Grant Corderoy, partner of independent aged care accountants StewartBrown, told HelloCare the Japara takeover bids are indicative of the difficult operating environment for providers.

Unless there are further increases in government funding or consumers are able to pay more for accommodation, it’s likely to remain difficult, he said. 

Both the Calvary and Bolton Clarke bids are likely attempts at “strategic acquisitions” aimed at increasing scale, Corduroy said.

“In business, there’s the old adage, you can’t just stand still.”

As not-for-profit providers, Calvary and Bolton Clarke will also have the “benefits” of not having to pay payroll tax, they’ll have fringe benefits concessions for staffing, and they won’t have to pay company tax.

Japara currently has around 5,600 nurses, carers and other support staff.

Japara is a “very good operator”, and a takeover by a not-for-profit is unlikely to have an impact on the quality of care at the bedside, he said.

At the time of writing, Japara’s share price was $1.16.

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