Aspen Group (ASX: APZ) is preparing for a second tilt at Eureka Group Holdings (ASX: EGH) in less than 12 months with the residential communities and retirement village group launching an off-market bid that values the target at $166 million.
The scrip-based offer, which is pitched at a net asset value of 52c a share, represents a sharp increase from the 39.9c offered in March last year in an unsolicited merger proposal that Aspen subsequently withdrew.
Aspen says the current nil-premium proposal is a 15.6 per cent premium to its previous offer that places an indicative value on Eureka shares of about 46c.
However, based on the audited net asset value of $2.01 for Aspen securities, Aspen says the deal implies a net asset value offer of 52c per Eureka share – representing a $166 million valuation for the company.
Aspen, which already has a 13.67 per cent stake in Eureka, is offering shareholders 0.26 fully paid ordinary stapled securities in Aspen for every Eureka share they own.
While Eureka says it has yet to receive a formal bid from Aspen, noting that the offer appears to be 'highly conditional', Aspen says a merger would create a group that has the ‘potential to be worth more together than as standalone entities’.
The Gold Coast-based Eureka Group is described as the only pure play ASX-listed provider of affordable seniors’ rental accommodation in Australia. It manages almost 2,900 units in 52 villages nationally, including the recent acquisition of six seniors’ rental villages in Western Australia for $44 million from Ingenia Communities Group (ASX: INA).
Aspen, which is headquartered in Sydney, has a portfolio of 5,000 dwellings across residential communities, retirement villages and holiday parks.
“Aspen and Eureka are in the same fundamental business of providing affordable accommodation to Australian households,” says Aspen.
“The merged group would be larger and more diversified than the individual entities alone which improves economies of scale and reduces risk.”
A merger of the companies would give Aspen a presence in every Australian state and the Northern Territory, comprising 8,000 dwellings and sites as well as a pipeline of 1,200 approved sites for future development.
If a full takeover is achieved, the equity split will see Aspen’s existing shareholders hold about 73 per cent of the merged entity while Eureka securityholders would hold the balance of 27 per cent.
Aspen estimates synergy savings of $2.2 million a year following the merger as well as pro forma underlying operating earnings per share of 13c to 13.5c in FY24. This represents a 4 per cent increase on Aspen’s current FY24 guidance.
Aspen shares were up 5c to $1.70 at 12.31pm (AEDT) while Eureka shares were trading 0.5c lower at 44.5c.
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