Quadrant-backed Estia drops on Australia trading debut
Estia Health, an Australian aged care provider backed by Quadrant Private Equity, saw its stock open at a 13% discount to the IPO price on the first day of trading in Sydney.
After opening at A$4.98, Estia dropped as low as A$4.73 before recovering to A$4.83 in the mid-afternoon. The company sold 126 million shares at A$5.75 apiece to raise A$725 million ($608 million) in its IPO, the fourth-largest offering in Australia this year. The S&P ASX 200 Index is down marginally.
Quadrant, Mercury Capital, founder Peter Arvanitis and COO Nick Yannopoulos together received proceeds of A$189.8 million, according to a filing. Quadrant's stake in the business has fallen from 57.5% to 17.1%, while Mercury has reduced its holding from 14.1% to 4.2%. Arvanitis now owns 7.7%, down from 25.9% ahead of the offering. Most of the capital raised has been used to pay down debt.
The offering valued the company at 21 times forward earnings, giving it a market capitalization of just over A$1 billion.
Quadrant committed A$90 million in equity for an approximate two thirds majority stake in Estia October 2013, with the enterprise valuation said to be in the region of A$170 million. The principal seller, Arvanitis, retained one third of the business. Mercury Capital bought a minority stake in Estia in July of this year.
The company is one of the largest providers of residential aged care services in Australia, with 3,203 places across 39 facilities in Victoria, South Australia, New South Wales and Queensland. Estia expects to complete five acquisitions by February 2015, which would make it the fourth-largest domestic player in its industry with 44 facilities. When Quadrant acquired Estia it had 1,100 places across 10 facilities.
As of June 2013, Australia's residential aged care industry comprised approximately 1,000 providers operating 2,700 facilities with around 190,000 places. Revenues were estimated to be A$12.9 billion in the 2013 financial year. Non-profit and government-owned providers account for 64% of places, with the private sector operating the remainder.
The Department of Health forecasts that approximately 259,000 places in care facilities will be required by 2022 to accommodate the needs of an aging yet affluent population. This implies an average 7,667 new places will need to be introduced each year.
Estia reported pro forma revenues of A$219 million in 2014, up from A$178.4 million the previous year. EBITDA was A$46.9 million, up from A$40.8 million. The company forecasts pro forma net profit of A$42.6 million in 2015.
UBS, Deutsche Bank and Morgan Stanley were joint lead managers for the IPO.
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