EQT revises offer for New Zealand’s Metlifecare

EQT agreed to buy Metlifecare in December for NZ$1.5 billion ($920 million) via an entity known as Asia Pacific Village Group (APVG), which is owned by the private equity firm’s infrastructure business. In April, EQT announced it was backing out of the deal, claiming that damage to Metlifecare’s economics caused by COVID-19 had triggered termination rights under a material adverse change (MAC) clause in the contract terms.

This precipitated a legal action by Metlifcare in May aimed at forcing EQT Partners to fulfill the initially agreed acquisition. Metlifecare’s position was that no MAC had occurred that there had been no prescribed occurrences that would permit APVG to terminate the transaction. At the time, APVG had claimed that the company’s net tangible assets had declined by more than NZ$200 million due to COVID-19, more than double the NZ$100 million threshold stipulated by the MAC clause. 

The revised offer contemplates a price of NZ$6.00 per share versus NZ$7.00 per share in the December agreement. This suggests a valuation of around NZ$1.3 billion. Shares in Metlifecare jumped 11% following confirmation of the revised offer to NZ$5.75. The stock was trading at NZ$5.76 as of mid-afternoon July 6, giving the company a market capitalization of about NZ$1.1 billion.

Metlifecare has responded by deferring a special meeting of shareholders that was scheduled for July 10 that was intended to vote on whether or not to continue its litigation against EQT. The retirement village operator said that it would instead engage with the investor in good faith to see if a new binding agreement could be achieved. It added that New Zealand Superannuation Fund, one of its existing investors, was supportive of advancing discussions on the revised offer.

“We have always indicated that the Board of Metlifecare is open to engaging on any reasonable alternative proposal. We welcome receipt of APVG’s NBIO [non-binding indicative offer] and intend to canvass shareholders on whether they prefer this alternative,” Kim Ellis, chairman of Metlifecare, said in a statement. “While there remain a number of issues to resolve and there is no guarantee we will be able to reach agreement, we look forward to productive discussions with APVG.”

Terms of the new offer include a requirement that a majority of Metlifecare’s directors vote in favor of the scheme and that consideration for the company be within or above a valuation range determined by an independent adviser. It also stipulates that there no longer be a MAC condition.

Investors with pre-close deals suffering from the impacts of COVID-19 are increasingly exploring their legal options with regard to MAC clauses, although there is little expectation that this will result in a widespread trend of disputes going to court.

EQT flagged the Metlifecare transaction earlier this year as part of a deepening commitment to Australasia. It opened an office in Sydney in February.

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• Topics
• Australasia
• Consumer
• Healthcare
• Buyouts
• New Zealand
• EQT Partners
• coronavirus
• covid-19