Japara Healthcare Ltd (ASX: JHC) announced late on Monday that it has completed contracts to acquire the Riviera Health residential aged care portfolio. Management said that this builds on Japara's strategy to grow through selective acquisitions that meet strict investment criteria and identifiable improvement opportunities.
The acquisition includes four aged care facilities at Brighton-Le-Sands, Chatswood, Doonside and Wyong. In the ASX release it said that the Brighton-Le-Sands facility is a newly-built 73 bed home, which is on course to open in August 2018. The Doonside facility is also new, it was built in 2017.
The acquisition also includes vacant possession of a closed aged care facility in Toukley on freehold land and 4.3 hectares of development land in Wyong.
The acquisition adds 507 bed licenses, 265 of which are currently operational.
Japara is building its presence in New South Wales and currently has five other facilities.
The net cash purchase price of Riviera is around $39 million and Japara will assume around $14.5 million of refundable accommodation deposits (RAD) and employee entitlement liabilities.
Management said that the cash purchase will be reduced to around $16 million as Japara expects to generate over $23 million from net RAD inflows from the nearly-completed Brighton-Le-Sands home over the next year and a half.
The acquisition will be funded from the company's existing debt facility and cash reserves. Japara expects to add $3.5 million to $4 million of operating EBITDA in FY19 after integration into the Japara model.
Japara's CEO, Mr Andrew Sudholz, said "We are pleased we were able to secure this highly value accretive acquisition opportunity…It provides Japara with an expanded footprint in high demand locations in New South Wales and an opportunity to further develop in these areas."
Foolish takeaway
This seems like a good purchase by Japara and it's a sizeable increase to the size of the business. The FY18 result will take a little hit with transaction costs, but it's looking good for Japara's medium-term and long-term future.
