Cash or scrip for Aveo

Published in the Australian
The mooted price keeps dropping by the minute lol
Brookfield’s Aveo bid likely to be cash or scrip

A deal between private equity giant Brookfield and retirement operator Aveo is believed to be down to the short strokes, with sources saying a cash-and-scrip bid worth at least $1.25 billion will probably emerge by the end of this week.
It is understood the plan by Brookfield is to offer shareholders the option to take all cash or all shares, or a combination of both, as it is also said to remain in talks to buy retirement village assets owned by listed rival Stockland.
Aveo would be run through a new Brookfield-backed company set up out of a country in the Caribbean, and some were expecting that the acquisition would be announced last week to coincide with an investment committee meeting held by the Toronto-based private equity firm held on Thursday.
Now it is expected that the deal will be announced by Friday.
The unknown factor continues to be the price of the transaction. The expectation earlier was that Brookfield would pay between $2.50 and $2.70 a share but now some say it could be north of $2.15 a share, with the most likely outcome being a bid of between $2.25 and $2.50.
Its major shareholder, Mulpha, is expected to take some cash off the table but remain as a backer of the business once it is listed.
The problem for Mulpha is said to be that it holds its 24.4 per cent interest in Aveo through various entities and may have to pay tax. That is why it may take money off the table.
Aveo’s shares closed yesterday at $1.945, up 1 per cent, after the company told the market that negotiations with Brookfield continued for a scheme of arrangement-style acquisition, and significant progress had been made.
Working for Aveo has been Merrill Lynch and law firm Herbert Smith Freehills.
Aveo confirmed reports in this column earlier this month that Brookfield was the preferred party to acquire the Australia-listed retirement operator and said it would provide a further update on or after July 22.
It came after senior Brookfield executives arrived in Australia this month for the takeover negotiations for the business that manages 93 retirement communities. While a deal was expected by June 30 following a sales process running since the start of this year, the company later offered a July 22 deadline for a transaction to occur.
Aveo had said that if a sale agreement could not be entered into by this date, a transaction was likely to be called off.
Earlier expectations were that Aveo would sell for between $2.50 and $2.70 a share but weak housing market conditions typically impact the managers of retirement villages.
Brookfield has demonstrated a healthy appetite for Australian and New Zealand assets this year as it looks to put money to work in a low-interest environment.
It has purchased the country’s second-largest private hospital operator, Healthscope, for $4.35bn and also struck a deal to acquire Vodafone New Zealand with Infratil for $3.2bn.