The NIB Holdings Limited (ASX: NHF) share price won't be going anywhere on Wednesday.
That's because this morning the private health insurer requested a trading halt.
Why is the NIB share price halted?
The NIB share price has been halted this morning so the company can undertake an equity raising to fund a new acquisition.
According to the release, NIB is aiming to raise a total of $150 million via a fully underwritten ~$135 million institutional equity placement and a ~$15 million non-underwritten share purchase plan (SPP).
The placement issue price will be determined via an institutional bookbuild with a floor price of $6.90. This is a discount of approximately 8% to the NIB share price prior to its halt.
What are the funds for?
The proceeds from the equity raising will be used to fund its entry into Australia's National Disability Insurance Scheme (NDIS) sector as a Plan Manager.
NIB's first acquisition is Maple Plan, the seventh largest Plan Manager with ~7,000 participants and revenue of approximately $10.4 million in FY 2022.
But NIB is unlikely to stop there. The company notes that other possible acquisitions are under active consideration. These could support NIB in achieving its goal of managing 50,000 participants by 2025.
NIB's Managing Director, Mark Fitzgibbon, commented:
The NDIS has become a vitally important part of Australia's social capital and a significant economic sector. Already it supports 530,000 participants with more than 800,000 expected by 2030. NDIS funding is expected to double from around $29 billion in 2022, to $59 billion by 2030.
First quarter update
NIB also released an update on its performance during the first quarter.
The release reveals that its underlying operating profit was up 0.8% to $64.3 million during the period. And, after adjusting for the COVID-19 givebacks, revenue was up 6.5% on the previous corresponding period.
One negative, though, was that volatile financial markets continued to impact investment returns in the first quarter. This has led to its net profit after tax falling 8.6% to $41.6 million.
Fitzgibbon commented:
Our flagship Australian residents health insurance (arhi) business continues to benefit from heightened demand, which appears to be driven by lingering COVID-19 concerns, and difficulties in public system waiting times. We don't celebrate these difficulties. But they are a reality and point to a need for an even greater private sector role in healthcare.
Our adjacent international students and workers, New Zealand and travel businesses are also doing well, with the student and travel businesses quickly recovering from the pandemic blow.
