Bains' Golden Years: The Acquisition of Estia Health

Bain Capital's long pursuit of aged care provider Estia Health has finally come to an end today.

August 07, 2023 • Estimated Reading Time: 13 minutes

Good Evening,

Welcome to the ASX News Daily Recap. Lost track of what happened on the market today?

Don’t stress. We’re here to catch you up.

Here’s a sample of what you may have missed:

  1. 🤝 Bain Capital gets greenlight for Estia takeover

  2. 🛑 ASX asks Lake Resources’ for a please explain

  3. 💵 Blocks’ bumpy ride continues

  4. 🐕 A look at Shina Inu's price rise

  5. 🃏 Play Uno & Get Paid!

The Recap

Bain Capital's Golden Years: The Acquisition of Estia Health

Today marked the unofficial start of earnings season, with companies slowly trickling through earnings reports before we ramp up into overdrive next week. It was a lacklustre start to the week on our market, with the ASX200 ending the day down 16.1 points or 0.22%, closing at 7,309.2.

The Healthcare (-1.08%) sector dipped lower for the second straight day, as investors continue to sell ResMed (-4.2%) after swift broker target price downgrades were issued today. CSL (-1.1%), Ramsey Health Care (-0.17%) and Cochlear (-0.88%) also fell in the sector. Financials (-0.38%) & Materials (-0.32%) were the other key sectors to drop. Real Estate (+0.48%) and Discretionary (+0.46%) led the way from the five sectors to finish higher.

Locally, it’s a quiet week for economic data, with consumer sentiment and business confidence surveys being released tomorrow, the only key data points expected to drop.

James Hardie (Tue), Charter Hall (Tue), CBA (Wed) and Suncorp (Wed) are a few of the larger companies that report earnings in the coming days worth keeping an eye on.

Private Equity group Bain Capitals’ long pursuit of aged care provider Estia Health has finally ended, with the Estia board recommending Bain’s $838 million takeover offer of $3.20 per share be approved in November’s shareholder meeting. The offer represents a 50% premium to Estia’s share price on the 21st of March, the last trading day before the initial Bain proposal of $3.00 per share. The upgraded offer of $3.20 was made on the 7th of June. Bain Capital is a global private equity firm with $150 billion in assets under management. Found in 1984, some of its most recent acquisitions from public markets include Virgin Australia (2020), Brillio (2019) and Tower Ltd (2018)

ASX200 Stock Snapshot - Gainers & Fallers
Wall Street

U.S. markets fell on Friday as Apple dipped below a $3 trillion market cap after a disappointing Q2 earnings result on slower iPhone sales. Tesla (-2.2%) and Meta (0.75%) also fell. Amazon was the big winner on Friday, rising 8.2% after a better-than-expected quarterly earnings report.

The S&P500 fell on Friday for the fourth straight day, finishing 0.53% lower, although bond prices fell after hitting highs not seen since November 2022. The U.S. 10-year yield dropped to 4.05%. Despite Amazon’s rise, the NASDAQ finished 0.36% lower.

Warren Buffett’s Berkshire Hathaway reported Q2 earnings which came in stronger than expected, recovering from investment losses a year ago. Berkshire reported quarterly operating earnings of $10 billion, a rise of 6.6% from the same quarter last year, boosted by its’ insurance underwriting business and higher investment income.

Economic News

  • July’s Non-farm payroll figure in the U.S. came in slightly lower than expected, with an increase of 187k jobs in the month, down on June (209k) and below forecasts of 200k.

  •  U.S. employment was a tick below forecasts, coming in at 3.5%, down from last month and July’s forecast of 3.6%.

In the U.S., July CPI gets reported on Thursday, estimated at 3.3%. Producer Price Index (PPI) will be reported on Friday.

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Markets

Index & Commodity Prices
Bond Prices
ASX By Sector
ETF Watch

Quick Singles

🪃 Local News

  • TPG Telecom has appointed former Domain CFO John Boniciolli as group CFO, effective from the 13th of November.

  • G.U.D Holdings will sell its Davey Water Products business to Waterco in a deal totalling $64.9m, expected to be finalised by the 1st of September. GUD ended the day 3.9% higher, whilst Wateroco traded flat for the day.

  • Dexus Convenience Retail REIT reported a statutory net loss after tax of $8.4 million, mainly due to $41.3 million of asset devaluations, a 5.0% decline compared to the previous book value. Dexus was still able to achieve property income growth, with an average rent review of 3.7% for the period. A dividend of 21.6 cents per share was also announced. Dexus's share price ended the day up 0.5% to $8.09.

  • Invocare went into a trading halt pre-market open, pending an update in relation to TPG Capital Global's revised takeover proposal on the 15th of May 2023.

  • GQG Partners reported increased Funds Under Management of $4.0 billion in July, with Net inflows for the first seven months of 2023 totalling $6.0 billion.

🌏 Around The Globe

  • Chat-GPT gets an update, with new features rolled out to improve UX, including prompt examples, suggested replies, defaulting to GPT-4 (as a plus user), uploading multiple files and keyboard shortcuts.

  • Alibaba's cloud computing unit has released two open-sourced AI models, Qwen-7B and Qwen-7B-Chat. The free model aims to support SMBs in adopting A.I.

  • Toyota is partnering with Pony.ai with plans to mass produce Robotaxis in China. The venture will aim to build cars that employ the startup's autonomous driving technology and ride-hailing services.

  • Private equity firms TDR Capital and Sycamore Partners are in talks to team up and acquire sandwich restaurant chain Subway in a reported $9 billion deal.

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Movers and Shakers

✅ Biggest Gainers

  • Estia Health (EHE) shares rose by 8.4% to $3.08 after announcing it has entered into a scheme implementation agreement with Bain Capital. Bain will acquire Estia Health for $3.20 a share. The acquiring price represents a 50% premium to the share price close of $2.14 on the 21st of March, the last trading date before Bains's initial proposal. Estia is permitted to pay fully franked dividends of up to $0.12 p/s, enabling eligible shareholders to receive up to $0.05 p/s in additional benefit from franking credits. Estia’s board unanimously recommended that shareholders vote in favour of the scheme at the upcoming shareholder meeting in November. Should it be approved, implementation is expected by the end of 2023.

  • Pilbara Minerals (PLS) continues its march upwards, rising 3.8% to $5.18 after announcing a “substantial increase” in mineral resources at its Pilgangoora operation in WA. The updated mineral resource represents a 36% increase in total resource tonnage and now contains 4.75 million tonnes of lithium oxide. Pilbara has been one of the star Lithium miners on the ASX, with its share price up by over 80% in the last 12 months.

🔻Biggest Fallers

  • Dual-listed U.S. fintech Block (SQ2) continues to slide, falling by 10.1% to $98.41 today after reporting quarterly earnings in the U.S. last Thursday. Block, the owner of Afterpay, reported an operating loss for the quarter which missed analysts' expectations. The banking and POS businesses saw healthy growth, but Afterpay's Buy Now Pay Later (BNPL) platform struggled on slowing consumer spend amid uncertain global market conditions. Block reported a 26% YoY increase in net revenue, with Cash App's gross profit up 37%, beating expectations. However, the payments business suffered a net loss of $132 million in the quarter. Block attributed macroeconomic headwinds to its Afterpay service, leading to the decision to shut down BNPL operations in France, Italy, and Spain.

  • Lake Resources (LKE) fell by a staggering 18% today after catching the eerie of the ASX with a 10-question, please explain from the security exchange regarding an operational update released on the 19th of June. The crux of the questioning surrounded Lake’s references to 25,000tpa and 50,000tps of battery-grade lithium carbonate and whether this was referenced as production targets. Lake confirmed that the figures refer to targeted maximum plant capacity, not projections or forecasts. Lake went on further to say that the actual production delivery is not due until the end of this year. Lake investors have had a tough 2023, with the company down by over 76% in the last 12 months.

Crypto Corner


From Meme coin to DeFi?

What’s Behind Shiba Inu’s Price Surge

Shiba Inu, the second-largest meme coin in the crypto world, has experienced a price surge over the weekend, with the price of the SHIB token rallying by 18%, climbing from a low of $0.00000865 to an early Sunday peak of $0.00001028.

What’s Behind The Price Increase?

Several factors, including the announcement of a blockchain-based digital identity system and the approval of SHIB as a collateral asset for loans on Binance.

The announcement of the blockchain-based digital identity system is a significant catalyst, signalling the coin's move towards more serious applications beyond its meme coin status. The development has been met with a positive response from the market, with on-chain metrics signalling an increase in trading volume.

The approval of SHIB as a collateral asset for loans on Binance was another significant driver of the price increase. This development allows Shiba Inu holders to deposit SHIB as collateral to obtain "Flexible Loans" on Binance, further increasing the utility and demand for the coin.

Shiba has made notable improvements to its token. Developers announced the integration of digital identity services into all platform applications, which aims to strengthen trust among users and governments.

The launch of Shibarium, a layer two network, is another significant improvement. This network will utilise BONE, TREAT, SHIB, and LEASH tokens for applications built on the blockchain. The test blockchain for Shibarium has already seen meaningful activity, with 27 million transactions from an estimated 16 million wallets, indicating demand for the network.

Crypto Price Watch

What The?

On occasions, we find something a little left-field

One moment while I write my resignation letter and finetune my Uno skills.

Toymaker Mattel is on the lookout for someone to help promote their new Uno game - Uno Quoatro, asking fans of the game to apply on TikTok for a chance to get the position of part-time ‘Chief Uno Player.’ with the role based in New York.

So I get paid to play Uno?

Pretty much. Responsibilities include playing the game Uno Quatro for four hours a day, four days a week, for a four-week stint. The job will pay US$4,444.44 (A$6,744) per week. (I’m sensing a theme).

The person selected for the job is expected to help create and star in social media posts, give interviews and challenge strangers to play the new version of the classic game, which relies on tiles instead of cards.

For you Aussie readers, I have some bad news; applicants must be U.S. residents aged 18 or over.

The TikTok video has over 12.9M views and received hundreds of replies from would-be hopefuls. The deadline to submit your CV is the 10th of August.

Good luck to those who apply →

@uno

🚨do you have what it takes to be our CHIEF UNO PLAYER?🚨 are you passionate about throwing down the Draw 4 and playing the Reverse Card IRL... See more

A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of 1st August

  1. Core Lithium (CXO) - 11.15%

  2. IDP Education (IEL) - 10.04%

  3. Flight Centre (FLT) - 9.93%

  4. Syrah Resources (SYR) - 8.49%

  5. JB Hi-Fi (JBH) - 8.43%

  6. Select Harvest (SHV) - 7.88%

  7. Brainchip (BRN) - 7.47%

  8. Pilbara Resources (PLS) - 7.42%

  9. Lake Resources (LKE) - 7.26%

  10. LendLease Group (LLC) - 7.15%

📊Broker Ratings

What do the brokers have to say?

  • City Chic Collective (CCX) - Upgraded to Buy from Hold (Bell Potter)

  • Judo Capital (JDO) - Downgraded to Neutral from Outperform (Macquarie)

  • New Hope (NHC) -Downgraded to Hold from Add (Morgans)

  • Solvar (SVR) - Downgraded to Hold from Buy (Bell Potter)

📅 Economic Calendar

Data to keep an eye on this week

Reader Review

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.