retirement indust - two horse race

Here’s my crystal ball view of things:

At the big end of town a backroom deal has been done to make the retirement village industry a two horse race...LLC and SGP...together with a host of small NFP's to make up the field.

LLC have just fired the first salvo by moving to mop up the 60% (approx) of LLP they don’t already control and this will catapult them into the #1 position.

They’ve made an offer under NTA and have managed to get a few “independent” (????) directors to recommend it.

I figure the instos in LLP will prise a few more cents out of them...but essentially it’s a done deal...just a question of what the F.O. price will be.

The deal makes complete commercial sense and LLC is positioning itself for the massive growth that is coming in this industry as more and more baby boomers retire.

If you doubt this...just get out the demographics on Australia’s population....then put it to the ultimate test....which is:

If the demand is increasing, then so too should the prices at these retirement villages, is it?

The answer...despite the GFC and the falling Aussie residential property prices...is YES they are!

The only problem standing between reality and “property heaven” for the retirement industry operators is the ability of the baby-boomers who want to move into these villages to sell their homes in the suburbs.

Meanwhile, back at SGP headquarters, you can bet they are following the LLP saga very closely and adjusting their battle plans for FKP accordingly.

Numbers will be crunched...phone calls made...support sought.

Bean-counters will be running “what if” scenarios...the property guys will be running the tape measure over the various villages looking for ways to immediately increase the cash flows...the marketing guys will be looking for ways to incorporate branding etc.

Remember...SGP has had since this time last year (under their exclusive first option basis) to fully assess the FKP retirement assets portfolio.

Frenetic SGP execs will be trying to come up with answers to these questions:

What are Mulpha thinking?
How will they react?
What deal can we make with them on the residential and commercial assets of FKP?
What support can we get from the top 20 shareholders?
What price will they take?
What will Phillip Parker and Rod Forrester take to walk the plank?
Who can we get on the inside to act as the “independent” directors?
What price can we “steal” the retirement assets for?
What is our absolute best price for the retirement assets?
When do we launch our attack?

Maybe they already know the answers to these questions and just like D Day (June 6, 1944) are waiting for the right tidal and lunar conditions.

But this is simple compared to D Day.

It’s just a case of price, isn’t it?

Presently, someone is holding FKP in the 75 – 82 trading range.

Are we been conditioned for an offer which is above the trading range but well below the NTA of around $1.20?

Some might say that this was LLC’s plan for LLP.

Interesting times!