Oceania Healthcare shares priced near bottom of IPO range at 79 cents

Oceania Healthcare will raise $200 million in an initial public offering after a bookbuild process priced the offer near the bottom of the indicative range.

The Auckland-based aged-care operator will sell 253.2 million shares, representing about 41.5 percent of the stock, at 79 cents apiece after setting the price and allocations in a bookbuild this week, the company said in a statement. Oceania had planned to sell between 192.3 million and 263.2 million shares, indicating a price of between 76 cents and $1.04 apiece, raising at least $200 million. Of that, $173.4 million was earmarked to reduce debt, giving the firm headroom to fund development projects, $16.1 million would be used to acquire the title of Oceania's Elderslea facility currently under lease, and the remaining $10.5 million would cover the offer costs.

"The bookbuild has been oversubscribed with strong demand from New Zealand, Australian and international investors," chief executive Earl Gasparich said. "Price and volume leadership were considered in the allocation process, enabling Oceania to establish a high-quality register of domestic and international investors."

Oceania is indirectly owned by Macquarie Group through Macquarie Infrastructure & Real Assets, which is not selling any shares into the offer. That stake is subject to an escrow arrangement and can't be sold until the first business day after the aged-care firm announces its annual earnings result for the year ended May 31, 2018.

The offer opens today with the broker offer closing on April 28 and the priority offer to selected people closing on April 21. Oceania will list on the NZX and ASX on May 5.

The price values Oceania at $482.1 million, including net debt of $103.2 million, making it the 46th biggest company on the S&P/NZX All Index behind Vista International Group and above Pushpay Holdings.

The company, which was formed through the merger of ElderCare and QualCare in 2008, runs 48 facilities in New Zealand, with 3,950 care beds, suites and units. It has 1,674 new residences in the pipeline with about 1,000 consented or under construction, mainly at its Lady Allum rest home site on Auckland's North Shore, as well as in Tauranga, Hamilton, Nelson and Christchurch.

Oceania is projecting annual underlying earnings of $33.5 million in the year ending May 31, which equates to a price-to-earnings ratio of 14.4 times. That compares to a ratio of 15.5 times across the NZX All Index.

(BusinessDesk)