Japara suitor sends aged care stocks flying

Aged care stocks rallied on Friday as Japara Healthcare became the second major company in the past six months to receive a takeover bid.

Not-for-profit Catholic healthcare organisation Calvary lobbed an indicative, non-binding proposal on Friday for shares in Japara at $1.04 each — a 30 per cent premium to Thursday’s closing price of 80¢.

Japara, which operates homes in Queensland, New South Wales, South Australia and Victoria, said it was considering the offer in the context of “expected improvements in trading conditions and the federal government’s upcoming budget and regulatory response to the Royal Commission into Aged Care Quality and Safety recommendations expected in May 2021”.

The board added that “there can be no certainty that the indicative proposal will result in a transaction”.

The company’s shares rocketed 25 per cent on the news to as high as $1 in early trade on Friday, before settling 20 per cent up to 96.5¢ just after 1pm. Japara’s ASX-listed peers Regis and Estia also saw gains, with Regis up 6.5 per cent to $2.31 by 1pm, while Estia was 6.4 per cent higher at $2.48.

It has been a tough 12 months for all three operators, with the aged care sector hit hard by Victoria’s second wave of coronavirus, as well as uncertainties about regulation stemming from the royal commission.

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The sector is also staring down a possible period of consolidation, with Calvary’s bid coming less than six months after suitors pursued Regis Healthcare. 

Regis received an offer from Washington H. Soul Pattinson, and the investment vehicle of Atlassian co-founder Scott Farquhar, Skip Capital, in the last quarter of 2020. A subsequent pitch was then made by Washington H. Soul Pattinson and Regis co-founder Bryan Dorman.