Major for-profit provider Regis is the latest aged care operator to list on the Australian Securities Exchange, following the success of the Japara float earlier in the year.
Regis, which operates 45 facilities across five states, will begin trading shares on 14 October, with a market capitalisation of $1.1 billion.
The public listing seeks to capitalise on strong investor interest in the aged care sector, which has intensified following the implementation of the Living Longer, Living Better reforms.
A third aged care private provider, Estia Health, which is owned by private equity firm Quadrant, is reportedly tipped to debut on the ASX boards early next year. It follows fellow private provider Japara Healthcare, which made a strong debut on the ASX in April.
Regis founders Bryan Dorman and Ian Roberts will retain a 54.5 per cent stake in the company after its initial public offering.
According to its prospectus, the 5,000-bed provider will use the funds raised by the offer to pursue expansion through new greenfield developments and acquisitions.
While no specific growth targets were outlined in the prospectus, Business Spectator reported Regis is looking to double in size within five years.
As Australian Ageing Agenda reported in August, Regis acquired ECH’s Tiwi residential care facility in Darwin, adding 135 beds to its portfolio.
Nearly 80 per cent of Regis’ facilities are located in high density, urban areas, and 30 per cent of places are extra service.
Regis chairman Mark Birrell told investors the company had experienced significant earnings growth over the past five years. He said the business had grown by offering premium services, optimising government funding entitlements and delivering efficiencies.
Mr Birrell also pointed to aged care as a high demand industry with significant government subsidies as contributing positively to the sector’s future outlook.
While Regis’ market share accounts for only 2.5 per cent of the sector, Regis said aged care’s highly fragmented market represents significant opportunity for “sophisticated private operators to grow through consolidation.”
Despite the welcome opportunity for new sources of capital investment, concerns have also been raised about the trend towards providers listing on the ASX, in particular the potential risks to care posed by shareholder investors seeking quick profits.
Dr Marie dela Rama from the Centre for Corporate Governance at the University of Technology, Sydney said publicly listed aged care companies had a responsibility to use the funds raised to improve care.
“The investments they have made and reaped should be funnelled into providing high quality aged care, not just to increase the returns of shareholders – the latter is a short-term view of care,” she told AAA.
Dr dela Rama said market valuation also takes a narrow view of the listed organisation and does not incorporate quality standards.
“A high market capitalisation does not necessarily imply the organisation provides exemplary quality care as cases of American listed aged care organisations have shown,” she said.
“The Australian Government is still heavily subsidising the sector in this country, especially companies that have gone to market to reward their founders, therefore listed organisations will go under a further layer of scrutiny as this type of legal and financial reporting requires.”
Private operators currently make up only 36 per cent of the residential aged care sector, but are the fastest growing segment.