Bain Capital’s tilt at Estia Health could face shareholder opposition

The US private investment firm’s $3 a share bid for the ASX-listed provider last Thursday is also facing scrutiny from shareholders and analysts. The Australian is reporting that major shareholder WAM Capital, which owns a 9% share of the provider, believes that the company is worth more than Bain’s $3 a share bid. Estia Health had announced a share buyback earlier this month, aiming to secure 10% of its shares over the next 12 months – a step that usually indicates a company feels its stock is being undervalued.

“We think they were on the pathway to more than $3 anyway. So we think the bid is undervalued,” WAM Capital lead portfolio manager Oscar Oberg said.

At least one analyst also thinks the offer should be higher. Investment banking and advisory firm Jarden said this week said that the bid “undervalues the equity” in the operator, particularly when compared to the other major aged care takeovers in recent years.

“Relative to the $131,000 enterprise value/bed multiple paid by Calvary for Japara Healthcare in 2021, Bain’s proposal for EHE is 17 per cent below,” a note from its analysts said. “We can also compare the proposed transaction with Bolton Clarke’s acquisition of Allity from Archer Capital, which was transacted at $176k EV/bed, which is a 62 per cent premium to the current Bain Capital proposal for EHE.”

Bain Capital has proposed a scheme of arrangement, which requires 75% of the votes cast on the offer to be in favour and more than 50% of shareholders to vote on the deal. Estia Health’s board says it is now considering whether it is in the best interests of shareholders to engage with Bain. Its share price was sitting at $2.62 as of close of business yesterday – a 12% premium on its $2.34 per share close last Thursday.