Metlifecare to raise capital as shareholder sells down

Retirement village operator Metlifecare plans to raise up to $45.5 million in new capital while its major shareholder will reduce its stake to at least 55% through a secondary share offer.

The announcement follows a strategic review of the company’s capital and ownership structure - cited as a key factor to the shares trading at a steep discount to net asset backing.

The capital raising consists of two components each dependent on both being completed.

Metlifecare will seek $40 million in new capital via a placement of new shares to institutions and other professional investors plus up to $5.5 million from a share purchase plan.

At the same time, cornerstone shareholder Retirement Villages New Zealand (RVG) will look to sell down its stake from 81.96% to 50-55% through a secondary offer of existing shares of approximately $50-70 million.

Both offers will be available only to qualifying habitual investors with Goldman Sachs acting as sole lead manager, placement agent and bookrunner.

Metlifecare said in a statement it expected to return to a dividend policy following the capital raising, targeting between 2c and 4c a share.

It will also restructure its board to incorporate three independent directors, an independent chairman, three RVG representatives and managing director.

Metlifecare managing director Alan Edwards said the capital restructuring would give the company a platform for growth and unlock value for shareholders.

Metlifecare, which has 16 retirement villages aimed at the upper end of the market, reported a profit of $20.8 million for the year to June, down from $67.5 million in 2010.



The company reduced bank debt by $44.5 million to $124 million during the year after selling its Merivale village in Christchurch just a fortnight before the February earthquake struck.

However, the company’s share price continues to trade at a significant discount to net tangible assets of $4.29 a share.

Metlifecare shares, currently in a trading halt, closed on Tuesday at $2.26.

RVG is a fund controlled by Macquarie Bank and Australian property company FKP. The fund lost $A49.9 million in the 2010-11 financial year, according to a report in the Australian Financial Review.

RVG acquired its Metlifecare shares in 2005 having launched a $341 million full takeover bid that fell short of the 90% compulsory acquisition target when Fisher Funds rejected the $3.90-a-share offer.



Fisher continues to hold 8.7% of Metlifecare.