Lend Lease Sells Aged-Care Business for A$270 Million

Lend Lease Group, Australia’s biggest property developer, agreed to sell its elderly care business for A$270 million ($278 million) to a company linked to buyout firm Archer Capital.

The developer will sell the business, which owns and manages 30 facilities across the nation, to Australian Aged Care Partners, which is controlled by funds managed or advised by Sydney-based Archer, Lend Lease said in a filing today. The company will receive a cash payment of A$200 million and a promissory note for A$70 million, it said. Lend Lease will continue to own and operate retirement villages, Chief Executive Officer Steve McCann said in the filing.

Over time, “Lend Lease would divest its smaller New Zealand operations and focus on its larger Australian retirement operations,” Anthony Passe-de Silva, an analyst at JPMorgan Chase & Co., said in an e-mailed note to clients today. “We would also anticipate that Lend Lease would look to divest part or all of the physical retirement villages to third party investors,” while retaining management and development rights, he said.

Lend Lease took over the unit -- then called Primelife Group -- which provides assisted living facilities for the elderly, in December 2009, paying 35 Australian cents a share for the stake it didn’t already own. That was equivalent to about A$170 million, the Age newspaper reported on Dec. 15, 2009.

Refocusing Business

The sale of the business announced today is part of the company’s strategy of divesting “non-core” assets, McCann said in the filing.

“The aged care business is more closely aligned to health-care services than property and is therefore considered non-core for Lend Lease,” McCann said. “Lend Lease will use the sale proceeds to continue to deliver its core development pipeline in Australia.”

David Armstrong, former managing director of DCA Aged Care Group, will be chief executive officer of Australian Aged Care Partners, Archer said in a separate e-mailed release. Suzanne Petterson, general manager of Lend Lease’s Aged Care business, will be chief operating officer, it said. Management and staff at all the facilities will be retained, Archer said.

The sale is expected to be finalized by the end of March, the company said.

“We have been evaluating investment opportunities in the aged care sector over the past three years,” Ben Frewin, partner at Archer, said in the release, adding it’s planning top invest more in this segment with “increasing demand for residential aged care.”

Sydney-based Lend Lease this month reported a 39 percent increase in profit in the six months to Dec. 31.

The shares rose 0.2 percent to A$10.665 as of 1:24 p.m. in Sydney, extending this year’s gain to 15 percent. That compares with a 9.2 percent advance for the benchmark S&P/ASX 200 index this year.

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