Archer Capital has entered into a binding agreement to exit aged care business Allity to non-profit operator Bolton Clarke.
Financial details of the transaction have not been disclosed but Brisbane-based Bolton Clarke is believed to be paying around $700 million. Allity’s EBITDA for the last financial year are understood to have been around $60 million.
Allity is Australia’s sixth largest residential aged care provider operating 43 homes with more than 3,800 beds across NSW, Victoria, Queensland and South Australia.
As a result of the transaction, Bolton Clarke, which already operates 37 aged care homes and 36 retirement villages, will become the equal second largest aged care homes operator in Australia alongside Estia Health. Opal HealthCare is the largest operator with 80 homes.
Bolton Clarke chief executive Stephen Muggleton said: “This is a rare and exciting opportunity to bring two strong companies together to set a foundation for future growth, innovation and seamless integrated care.”
Archer set up Allity after acquiring 30 aged care homes from Lendlease (ASX: LLC) for $270 million in 2013. The business is an investment of the $1.5 billion, 2011 vintage, Archer Capital Fund 5.
Further large transactions are expected in the aged care sector which the federal government currently funds at a rate of about $24 billion a year. This rate of funding is expected to be significantly increased in future in response to findings of the recent Royal Commission into Aged Care Quality and Safety.
Larger operators are also anticipating acquiring small operators that may struggle to meet new standards.
Earlier this year, Bolton Clarke was the underbidder to another not-for-profit, Calvary Healthcare, in the auction for then ASX-listed Japara Healthcare.
Like commercial aged care homes operators, non-profits recognise significant economies of scale can be achieved through mergers. But they have an advantage in that some of their operating costs are lower including staff costs as payroll tax is not levied on non-profit organisations.
Allity was advised by Macquarie and Evans & Partners while Bolton Clarke was advised by Moelis Australia and Ansell Strategic.
Image: Allity’s Pemulwuy, Sydney, facility.