Oceania aged-care business planning IPO, in talks with investors

Oceania Healthcare is on track for an initial public offering in early 2015, but the Macquarie Group managed aged-care operator's chief executive, Earl Gasparich, says he's also in talks with private investors and funds.

The Auckland-based company is seeking new capital to develop prime brownfield sites in Auckland, Tauranga and Nelson, Gasparich told BusinessDesk. That could be through either an IPO, which was first touted in July, or by way of a trade sale. He declined to name prospective bidders but BusinessDesk understands talks have been underway with Australian private equity firms Quadrant Private Equity and Pacific Equity Partners, and Wellington-based Infratil. They didn't immediately respond to requests for comment.

"We are a company which needs further capital and the owners are committed to raising that," Gasparich said. "We've certainly done all the work for an IPO, but often in these processes once it gets known and there's some publicity around it you get some inquiries from other funds and other investors who are interested in the sector.

"We did spend some time engaging with parties and we still are, but we're still very much on track for an IPO," Gasparich said. "Obviously that won't happen this side of Christmas but probably in the first or second quarter of 2015, if one of these other interested parties doesn't come to anything."

Oceania, formed through the merger of ElderCare and QualCare in 2008, has tidied up its balance sheet this year in preparation for a sale, turning to positive equity in the 12 months ended May 31 and issuing shares to satisfy a $238.1 million related-party debt, according to financial statements filed to the Companies Office. At balance date the company had total equity of $81.2 million, compared to an equity deficit of $132.9 million a year earlier. It has since issued a further $37 million of new shares to satisfy convertible notes and accrued interest held by related parties.

Oceania "has got a lot of brownfields development opportunities, mainly in urban locations - so Auckland, Tauranga and Nelson," said Gasparich. "We need the capital to grow and it's time for the company to go through that process and start building." Oceania has about 2,800 care beds, which include hospital, rest home and dementia level care, with a further 1,000 retirement village units, and would look to add a further 1,400 retirement village units to double its size.

Gasparich says Oceania differs from listed retirement village operators Metlifecare, Ryman Healthcare and Summerset Group Holdings in targeting an older demographic for its aged residential care rather than building and managing residential "lifestyle" villages.

"With the extra capital we'll be undertaking a large development activity," he said. "There is a lot of room for growth. The over-85 population is predicted to double in the next 10 to 15 years, so huge demand for care coming. It's competitive in certain regions, in some regions where all of the operators are building there is competition to get residents to come to your site. By and large we're an aged care provider, that's our specialty, and so we provide a real 'ageing in place' option for residents."

Oceania's revenue shrank 17 percent to $187 million in the 12 months ended May 31, which Gasparich said was due to a smaller village footprint. The company narrowed its annual loss to $24 million, from $32 million a year earlier, as expenses dropped 20 percent to $191 million.

Arvida Group is the next retirement village operator to go public, with plans for the company to list later this month after raising $75 million in its IPO.