'Best outcome from bad situation': Aveo accepts $1.27b Brookfield deal

Aveo told investors on Wednesday it has entered a scheme of implementation with entities controlled by the Canadian investment powerhouse that entitles security holders to a cash payment of $2.195 per security.

The agreed amount includes a 4.5¢ per security annual distribution announced on June 24 this year and payable on 30 September.

The cash offer represents a 28 per cent premium on Aveo’s closing price of $1.71 on February 12, when it told security holders it had received a number of indicative non-binding bids from interested buyers.

Investors, fed up with the long drawn-out transaction, bailed from Aveo’s share register en masse on Wednesday with about 127 million shares transacting.

Arbitrage opportunity
One enterprising buyer, sniffing an arbitrage opportunity to make a quick 3¢ per share profit, still had an outstanding 23.4 million buy order in the market at trade’s end, according to Bloomberg.

Aveo’s shares closed on Wednesday at $2.12.

“The Brookfield transaction is subject to a limited number of conditions and is not subject to financing or due diligence,” Aveo said.

“Based on the cash consideration, the full Aveo board of directors unanimously recommends that Aveo securityholders vote in favour of the scheme in the absence of a superior proposal.”

Brookfield declined to comment. Aveo is Australia’s largest ASX-listed pure-play retirement village operator and has more than 13,000 residents in about 90 villages across the country.

It competes with diversified property groups such as Stockland and Lendlease.

The takeover will be scrutinised by an independent expert to determine it’s in the best interests of Aveo securityholders. For investors unwilling to sell, an alternative conditional scrip consideration was available giving them “stub equity” in a vehicle with future exposure to Aveo.

Malaysian support
Brookfield’s bid for the group was complicated by the large presence of Malaysian investor Mulpha on the share registry. It owns 24.4 per cent of the company.

Mulpha Group’s nominee directors Seng Huang Lee and Eric Lee confirmed to Aveo’s board they intend to recommend to their parent company, listed on the Bursa Malaysia, that it should support the transaction.

“Should Mulpha inform Aveo of its voting or consideration election intentions, Aveo will update the market accordingly,” it said.

One analyst described the offer as the “best outcome from a bad situation.”

In a note to investors, Macquarie Bank said, “it has confirmed our view of a deteriorating cash liquidity position and further asset impairments.”

Aveo revealed mid-year that Australia’s real estate slump has hit its earnings, warning underlying profits would fall to $50 million and cutting its annual distribution to unit holders in half.

Settlements were taking longer as incoming residents experience increased difficulty in selling their homes, creating the knock-on effect of delaying decisions to purchase in Aveo’s villages.

The group’s sales took a dive after a joint investigation by The Age and Herald in conjunction with ABC’s 4 Corners exposed a litany of questionable business practices, including churning of residents, fee-gouging, safety issues and misleading marketing promises.