Estia Health Limited (ASX: EHE) has announced a significant expansion of its operations in regional Victoria with the acquisition of two residential aged care homes. The Group has entered into binding agreements to acquire the Royal Freemasons (RFL) homes in Kangaroo Flat – Bendigo and Benalla, both of which provide modern and scalable facilities.
The acquisition includes the Royal Freemasons residential aged care home in Kangaroo Flat – Bendigo, with 144 operating places, and the Benalla home, which offers 120 operating places. These state-of-the-art facilities were completed in 2017 and 2019, respectively, and are expected to bolster Estia Health’s presence in regional Victoria.
To finalise the acquisition, Estia Health will pay a total net cash consideration of approximately $17.3 million, which excludes stamp duty and transaction costs. The funds will be sourced from the Group’s existing debt facilities. The final consideration is subject to the Refundable Accommodation Deposit (RAD) balances and employee obligations at the time of completion, which are estimated to be around $35.8 million.
Subject to customary closing conditions, the transactions are anticipated to conclude in early October 2023.
As part of the acquisition process, Estia Health will be consolidating portions of its existing operations in Bendigo and Benalla. This consolidation will entail relocating residents and employees from the current Estia Health Long Gully in Bendigo to either the Group’s other existing home in Bendigo (Victoria Heights) or the RFL Kangaroo Flat home being acquired. Similarly, the employees and residents of Estia Health Benalla will be transferred to the RFL Benalla home.
Once these transitions are complete, both the acquired RFL homes are expected to be at or close to full occupancy.
In an ASX release, Sean Bilton, the CEO of Estia Health stated, “We are proud to continue to be part of both the Bendigo and Benalla communities and to be able to increase our commitment to regional Victoria with the addition of a further 150 residential aged care places.”
He further highlighted that the consolidation of Estia Health and RFL homes in these locations would ensure the continuation of high-quality aged care in modern facilities, addressing the needs of regional communities effectively.
Following the successful relocation of residents and employees, Estia Health intends to evaluate options for the Estia Health Long Gully and Estia Health Benalla locations. These options may include repurposing or selling. As a result of this evaluation, the Group expects a provisional non-cash post-tax impairment charge of approximately $8.0 million to be recognised in its FY23 financial report (subject to audit finalisation).
Estia Health remains in discussions with Bain Capital for a potential acquisition at $3.20 per share.