Arvida's $77m rights issue to help buy three new villages

Arvida Group plans to raise $77 million in a discounted rights issue to help pay for three new retirement villages it says will boost annual earnings by 8%.

The Auckland-based retirement village group wants to sell about 66.9 million shares in a fully underwritten one-for-five pro rata renounceable rights issue at $1.15 apiece, an 11% discount to yesterday's closing price of $1.29. The funds raised will go toward the $106 million acquisition of the Mary Doyle Lifecare village in Havelock North, the Strathallan village in Timaru, and a 50% stake in Wellington's Village at the Park Lifecare. The rest of the deal will be funded through the issue of $16 million of stock to the vendors and $16 million of bank debt.

The acquisitions will add another 451 retirement units and 315 aged care beds to Arvida's existing 26 retirement villages, and add 110 consented units to its development pipeline. The NZX-listed company expects the acquisitions will add an extra $9 million to annual underlying profit in the year ending March 31, 2018, and boost underlying earnings per share by 8%.

"We are delighted to add another three quality villages to our portfolio," chairman Peter Wilson said in a statement. "Hurst Lifecare's desire to receive Arvida shares is a strong endorsement of our strategy from a long-standing industry participant," he said referring to the vendor of the Mary Doyle and Strathallan villages.

Arvida has been expanding its portfolio since listing in late 2014 through a merger of 17 villages and raised $41.8 million through a rights issue in October to buy three sites.

The company expects developments at Village in the Park and Mary Doyle to boost earnings further, with the consented units seen coming on stream over the next four years.

The Village in the Park will be a joint venture with existing owner Wellington Tenths Trust, which was embroiled in a long-running fraud case involving former chairman Sir Ngatata Love, who was convicted last year of accepting a secret payment while chairman of the trust.

Shareholders on the register at the close of trading on September 20 will be eligible to participate in the offer, which closes on October 9. Forsyth Barr has fully underwritten the offer.

(BusinessDesk)