Arvida Group raises $75 million in IPO

Arvida Group, the new retirement village operator, has raised the full $75 million sought through an initial public offering following strong demand from New Zealand and Australian institutions and listed companies.

A further $5 million priority pool for existing residents, staff and investors in the 17 retirement villages and aged care facilities involved in the merger remains open until next Thursday.

Following a successful bookbuild process, the offer price has been set at 95 cents a share, near the top of the 85 cents to $1 indicative price range. Based on the final price, Arvida will have a market capitalisation of approximately $214.2 million upon listing.

Chairman Peter Wilson said they chose to set the price at that level to get a balance between existing investors and the company's future as a listed entity on the NZX.

"Arvida has identified an opportunity for growth and further consolidation in the sector, to meet the demands of New Zealand's ageing population for a continuum of care in facilities that meet their expectations," he said.

Arvida will use the funds raised to repay $70 million of debt and $4.35 million of offer costs while the company also has a $40 million bank borrowing facility to develop more than 160 new units at existing villages and also consider new acquisitions to expand its geographic spread.

Chief Executive Bill McDonald said the immediate focus was to complete the integration of the 17 foundation villages and establish a support centre for the existing village management teams who will remain in place. Approximately 54 percent of Arvida's 1800 residents are in aged care facilities with a further 25 percent in serviced apartments.

The financial information in the prospectus shows the company is forecast to make a loss of $1.4 million in the 2015 financial year on revenue of $59 million. When the costs of the offer and aggregating the resthome portfolio are excluded, the prospectus says, underlying profit for the 2015 financial year would be $4 million, rising to $13.3 million in the 2016 financial year. The underlying profit figures exclude unrealised gains from property revaluations and no synergy benefits of merging the group of resthomes have been factored into the forecasts as Wilson said these will be incremental.

Based on current earnings forecasts, Arvida intends paying a first dividend of about $2.3 million in late May 2015 for the first financial quarter ending March 31.

The broker firm offer opens on Nov. 27 until Dec.15 and listing is expected to take place on Dec.18.