After the bell last night, Washington H. Soul Pattinson had tabled an offer of $1.85 per share to acquire the aged care company Regis.
The Regis share price is now up 21.36% to $1.79, while the Washington H. Soul Pattinson share price has dropped by almost 3% to $28.09 at the time of writing.
What was offered in the deal
Washington H. Soul Pattinson had proposed that Regis shareholders can either accept the offer in cash, or a scrip/share alternative in a new company, which will allow them to retain an exposure to Regis as a privately operated business.
The proposed offer price of $1.85 represented a 25% premium to the closing price on 19 November 2020. It’s also a 59% premium to the average share price over the past month.
Why Regis rejected the offer
Regis says that today’s offer of $1.85 follows another rejection by the Regis board of an earlier proposal from Washington H. Soul Pattinson and Skip Capital in September of $1.65 per share.
The company says both offers “materially undervalued the company having regard to its medium to long term prospects.”
In an announcement released to the market today, Regis says its decision to reject the offer was based on three underlying factors:
- the Aged Care Royal Commission is due to deliver its final report on 26 February 2021, with substantial policy and funding reform expected to be recommended to the Commonwealth Government
- the Commonwealth Government has committed publicly that it will respond to the recommendations of the Aged Care Royal Commission in the May 2021 Budget and has foreshadowed substantial additional funding for the aged care sector
- the easing of the impact of COVID-19 resulting in improving trends in the aged care sector performance.
Regis also advised its shareholders not to take any action in relation to the proposal.
How did the Regis share price perform in 2020
The company has been ripe as a takeover target as the Regis share price lost almost 30% this year in a difficult period faced by aged-care facilities due to the pandemic. In August, the company reported poor full year results with a drop in net profit after tax (NPAT) of 54%. With the current share price of $1.79, the company has a market cap of more than $444 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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