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SINGAPORE Press Holdings (SPH) is buying nursing home provider Orange Valley Healthcare for S$164 million as the media and property group seeks to build a third business leg in healthcare.
SPH, which owns The Business Times, is acquiring all of the shares and intellectual property of Orange Valley from private equity firm KV Asia Capital in an all-cash deal that is free of debt. KV acquired the target in April 2014.
This is the largest non-property acquisition ever made by SPH, which framed the deal as the first of potentially more in the healthcare space.
"Aged care if you think about it is always a continuum," SPH deputy chief executive Anthony Tan said in response to queries. "Of course we will continue to evaluate what the opportunities are in this sector."
In Orange Valley, SPH will get a business that it said is already profitable and immediately accretive, although the impact on earnings and net tangible assets per share in the year ending Aug 31, 2017 is not expected to be material.
Orange Valley runs five nursing homes in Singapore with more than 900 beds. It charges about S$2,500 to S$2,700 per month for each bed, placing it at the premium end of the Singapore market. The business also provides a range of ancillary services such as meals and catering, physiotherapy and rehabilitation, and medical supplies and equipment through wholly-owned subsidiaries. SPH will retain Orange Valley's existing management.
SPH expects the sector to grow over the next decade, based on official projections that the population of 65-years-and-older Singaporeans will double to 900,000 by 2030. Mr Tan said that the voluntary welfare organisations (VWOs) currently dominating the market will find it hard to meet the growing demand.
"The bulk of the operators today are VWOs, and for VWOs the biggest single handicap is scaling to size, and I think that it then presents an opportunity for the private sector to come into the market," Mr Tan said.
The hope, he said, is that SPH will find the buds of a third major business for the group as its core media arm goes through a downturn.
Mr Tan said the deal was about "finding a revenue source that is resilient."
"This is not the first time, right?" he said. "Property was it, then we went into other businesses. Some of it, we had good times, but we also found it hard to scale. This one we think will give us some legs going forward if we do it right. So the immediate, one acquisition will not make the entire story, but we hope that this is a part of an overall story that will come."
Mr Tan said that in Singapore, "we will continue to try to grow the business... by bidding for plots of land from the government designated for aged care services" and that "we may look at adjacent businesses and growing some of these, including home care rehabilitation services".
SPH would also look at other acquisition opportunities in adjacent fields and expand regionally, he added, noting that there is increasing demand for aged care services in neighbouring countries too.
SPH is paying about 2.3 times Orange Valley's net asset value of S$71 million as at March 31, 2017. Orange Valley's profitability details were not disclosed.
None of the leading private-sector nursing home providers in Singapore are currently listed.
Econ Healthcare Group, which has 11 medicare centres and nursing homes in Singapore and Malaysia, was taken private in 2012, and in July 2016 founder Ong Chu Poh bought back a 49 per cent stake from private equity investor EQT for an undisclosed sum.
Pacific Healthcare Holdings, which has two nursing homes in Singapore, was delisted in 2016 at an exit offer price that valued the company at S$573,743, albeit on negative equity of about S$3.4 million.
Privately held United Medicare Centre says it has 689 beds across three centres.
The listed healthcare companies that have nursing home exposure mostly own centres in Japan.
ParkwayLife Reit has several nursing home assets in Japan, although it also runs hospitals in Singapore and Malaysia.
International Healthway Corp, which is currently fighting for its own survival amid cashflow issues, also owns nursing homes in Japan.