FVE strikes me as a wonderful private equity opportunity. It trades at a steep discount to book value and a low multiple of EBITDA because of management concerns and ownership structure.
If a PE group bought the company in conjunction with management for $5, they could use the credit facility in place to buy back about 25 million shares.
Also, if they borrowed an extra $75 million and put in $50 million of equity, they would be able to repay the debt very quickly. The company should generate nearly $50 million in EBITDA this year, that would allow a 5 year payback.
That is with no occupancy improvement. If occupancy improves back to just 90% in the next couple of years, that would likely yield about $75 to $80 million in EBITDA, which would shorten the payback to a little over 3 years.
After that, they could dividend back their initial $50 million investment and within 5 years, they would own a business doing over $80 million in annual EBITDA for virtually zero.
This is a company with no technology risk, improving demographics, and an improving housing market. We are at the beginning of a strong twenty year senior housing cycle.
It would be nice to have an extra $50 million to get this done...time for PE to get back in this space in a big way. Particularly with a company that trades at a fraction of liquidation value.
You nailed it! and I agree that FVE presents an even more compelling opportunity. Frankly, if you look at the comps and recent transactions, FVE is a screaming opportunity for these funds both from value and focus perspectives.