In The News
Tuesday 19 September 2017
Moelis Australia Acquires Controlling Interest in Infinite Care
Scale Investment in Australian Aged Care Sector
Sydney, 19 September 2017 – Moelis Australia Limited (“Moelis Australia”) (ASX: MOE) has entered into an agreement with Next Capital to acquire a controlling interest in Infinite Care, an operator and developer of aged care facilities in Australia. The acquisition involves Moelis Australia paying $45.4 million for a 70% interest in Infinite Care in addition to the establishment of the Moelis Australia Healthcare REIT. Infinite Care’s founding management will retain its 30% stake in Infinite Care.
Infinite Care is an industry leader in the delivery of responsive, holistic and innovative care and services to the ageing community. Infinite Care currently operates a portfolio of 5 recently refurbished aged care facilities and has a development pipeline of ~1,500 bed licenses across 13 to be developed facilities in areas of aged care undersupply.
Moelis Australia will hold its interest in Infinite Care in a newly established managed fund, the Moelis Australia Aged Care Fund (“Infinite Fund”). Moelis Australia intends to offer third party investors the opportunity to co-invest in the Infinite Fund with Moelis Australia retaining a co-investment stake of not less than 10%. Founders and Joint Managing Directors of Infinite Care, Chris Stride and Tony Partridge will continue to run the business.
The Infinite Fund is targeting a total return to third-party co-investors of 20%+ per annum over a 4 year term. The Infinite Fund will provide investors with exposure to the attractive fundamentals of the Australian aged care sector via co-investment in an established operator with a large development pipeline. Profitable and cash flow generative, Infinite Care has an existing ~400 bed platform, an established head office function and a substantial greenfield development pipeline of ~1,500 bed licenses across 13 to be developed facilities in areas of aged care undersupply. Importantly, Infinite Care has a highly experienced and financially aligned management team, with a strong track record in aged care.
Fully developed, Infinite Care’s 1,500 bed pipeline of new aged care facilities should have a total value in excess of $450 million.
As a component of the transaction the Moelis Australia Healthcare REIT (“REIT”) will acquire the freehold real estate and provide development funding for two of Infinite Care’s new aged care facility developments. The initial investment of $44.5 million in equity to acquire and fund these assets will be fully subscribed by funds managed by Moelis Australia. The REIT is forecast to deliver investors a distribution yield of approximately 7% per annum and total return of 10% per annum. Moelis Australia will manage the REIT. The REIT has potential to grow over time as new facilities are acquired and/or developed.
Andrew Pridham, Chief Executive Officer of Moelis Australia said “We are excited by the opportunity to invest in the Australian aged care sector and offer our investors exposure to an industry which we believe has very favourable fundamentals, driven by Australia’s rapidly aging population and looming undersupply of aged care facilities.
We believe Infinite Care is a quality business with significant potential for growth. It is led by a highly experienced and aligned management team and we look forward to supporting Chris and Tony over the coming years as they grow the business.
This investment in the Australian aged care sector is consistent with our strategy of investing in what we believe are attractive industry segments characterised by sound macro fundamentals, underlying real estate exposure and quality management teams.
This transaction highlights our ability to originate attractive high return opportunities for clients of our asset management business and Moelis Australia, and we look forward to growing our activities in the aged care sector over time.”
The transaction is conditional on FIRB approval and standard closing conditions and is expected to complete in late October 2017.
Next Capital successfully completed an exit of half of its stake in Scottish Pacific through an IPO on the ASX in July 2016. The business was floated for a Market Value of nearly $450M, realising an upfront return of approximately 2x for its investors and management, with the potential for material additional returns through monetisation of Next Capital’s remaining 50% stake. The business is well placed to continue its strong growth given:
- ScotPac’s leading market position in a niche segment with significant barriers to entry;
- low-risk growth potential associated with the business’ ability to leverage strong underlying long-term demand in the core debtor finance market;
- significant incremental growth potential associated with new products and channels in development; and
- a very strong, experienced and incentivised management team, with a history of delivering strong year-on-year growth through economic and credit cycles.
Next Capital successfully completes the majority acquisition of Alpha Group (“Alpha”).
Next Capital completed the acquisition of a controlling interest in Alpha in April 2017. Established in 2006 as a car hire business, today Alpha Group is a provider of car leases, whilst also operating synergistic car hire and car parking businesses.
Next Capital’s investment has been predicated on the following factors:
- leading market position in a niche segment with significant barriers to entry and a strong value proposition;
- attractive platform asset with three synergistic divisions providing a basis to generate enhanced returns to the Group;
- significant growth prospects, with actionable opportunities to increase penetration in existing markets as well as further geographic expansion, utilising new sales channels, servicing other markets as well as scale benefits delivering cost synergies; and
- highly experienced and proven management team.
Next Capital successfully completed the acquisition of a controlling interest in Funlab in December 2016. Funlab creates, develops and operates out-of-home entertainment and leisure venues. The Business currently services over three million customers per annum, across three concepts from 17+ locations on Australia’s eastern seaboard:
- Strike Bowling bars: social bowling, escape rooms, laser tag, karaoke, pool and a licenced bar and kitchen;
- Sky Zone indoor trampoline parks are operated under a franchise agreement with US franchisor; and
- Holey Moley: Australia’s first putt putt mini-golf with full service licenced bar
The out of-home leisure and entertainment industry is benefitting from a global trend, where consumers are spending more of their disposable income on experiences and less on goods. Funlab delivers a superior offering relative to its competitors in both the bowling bar and trampoline park markets. The business’ newest offering, Holey Moley, is a new concept in Australia with no competitors to date.
Lynch Group Holdings:
Next Capital successfully completes the majority acquisition of Lynch Group Holdings (“Lynch”).
Next Capital completed the acquisition of a controlling interest in Lynch in November 2015. Lynch is Australia’s leading integrated supplier, wholesaler and merchandiser of fresh cut flowers and potted plants. Lynch also operates flower farming and processing assets in Kunming, China as well as three farms in Australia which grow and supply specialty flower and potted products to support its range.
Lynch is Australia’s only fully integrated floral and potted plant operator. Its operations span and control all aspects of the fresh flower and potted plant value chain, which positions Lynch as the clear industry leader with strong market share in all the key markets in which it competes. Lynch is vertically integrated across sourcing (third party and internal), design and processing, distribution / merchandising and sales The core business, which services the mass market retail channel, has a leading market position which provides a strong core growth proposition and the opportunity to execute a range of domestic and international growth initiatives.
IPO of Vitaco Holdings
Next Capital successfully completed the majority exit of its investment in Vitaco through an IPO on the ASX in September 2015. The business was floated for an Enterprise Value of $332M generating a return of 3.2x for its investors and management. The business is well placed to continue its strong growth given:
- Leading market positions with established and trusted brands like Healtheries, Nutra-Life, Aussie Bodies and Musashi
- Exposure to attractive categories with multiple avenues for growth including continued new product development, expansion of distribution points, margin expansion through the in-sourcing of products and exposure to high growth regions like China
- Diversified product portfolio with multiple channels to market
- Operates a vertically integrated business model that develops, manufactures, distributes and markets its products, with capacity to support future growth
- Highly experienced management team