Persistence pays for Bain Capital as it seals deal to buy Estia Health for $838m

Persistence appears to have paid off for private equity group Bain Capital which has finally secured a deal to acquire Sydney-based aged-care operator Estia Health for $838 million after chasing the company for most of this year.

Bain has signed an agreement to acquire all of Estia Health’s shares for $3.20 each after proposing the increased off in June – up from its initial bid of $3 a share in March, an offer that Estia had rejected.

Bain Capital has now entered a formal scheme implementation agreement to take full control of one of Australia’s largest aged-care operators with the unanimous backing of the Estia board.

Estia Health chairman Gary Weiss has described the offer as a ‘good outcome’ for shareholders and ‘our stakeholders more broadly’.

“We are pleased that Bain Capital has recognised Estia Health’s value as a leading Australian aged care operator with a strong reputation for person-centred care,” says Estia Health chairman Gary Weiss.

“The Estia Health board is confident as to the outlook for the business, however, recognises that the scheme allows shareholders to realise certain cash value now at an attractive premium.

“The board considered a range of matters in coming to its unanimous recommendation, including the intrinsic value of Estia Health under a range of scenarios and the price at which its shares may trade over the medium term in the absence of the scheme.”

Bain Capital is keen to acquire Estia Health despite the company posting a bottom-line loss of $25.3 million in the first half of FY23, which was down from a $544.3 million loss in the previous corresponding period.

However, Estia recorded a 9 per cent increase in revenue to $359.2 million during the period and total EBITDA of $40.7 million, up $4.7 million from a year earlier.

“Bain Capital’s interest in Estia Health is a strong endorsement of our strategy to build a market leading aged-care provider focused on creating high quality outcomes for our residents and families and an attractive and supportive environment for our employees,” says Estia Health CEO Sean Bilton.

“We look forward to a partnership that will continue to deliver our core purpose to enrich and celebrate life together.”

The scheme is subject to a number of conditions, including an independent expert’s report on the merits of the deal and shareholder approval, which will be sought in November.

Bain Capital now has exclusive rights to due diligence of Estia Health’s financials before offering a binding proposal that is expected to see the takeover settled before the end of this calendar year.

Estia Health operates 73 aged-care facilities in Queensland, NSW, Victoria and South Australia that care for about 8,000 residents.

The acquisition by Bain Capital comes despite a profitability crisis in the aged-care sector with the federal government’s first quarterly snapshot of the industry released earlier this year showing only 33 per cent of residential aged-care providers posted a profit last year.

Shares in Estia Health jumped more than 10 per cent to $3.12 at the opening bell this morning following today's announcement. They were trading at $3.10 at 10.08am (AEST).