In the past seven weeks, hostile bidder Healthcare Partners has only gained 1% acceptances from shareholders in its attempt to raise its 19% stake in Abano to 50.1%.
Yesterday, Healthcare Partners extended its offer date from February 13 to March 3.If it cannot get the controlling stake, the question is whether it sells its holding after March 3, or stubbornly remains a thorn in Abano’s side.
Abano has about 100 Lumino dental practices in New Zealand and a similar number of Maven practices in Australia. It also has a 73% stake in Insight+Ascot Radiology in Auckland.
The company employs about 2000 people, including medical, technician and administrative staff.Abano chief executive Richard Keys was in Dunedin this week on the start of a country-wide tour, visiting practices, shareholders and sharebrokers, ending in Tauranga and Auckland next week.A new Lumino practice has just been opened in Wanaka, two Pitt St practices in Dunedin have recently been merged, becoming the second site in the city, and there is a Lumino in Mosgiel.Abano said recently it was on track to acquire its 200th dental practice by the end of this month, plus an additional 31 practices in the 2017 financial year.At the heart of the takeover is the insistence of Healthcare Partners, the majority Abano shareholder, that acquisitions be slowed, existing operations be improved and debt paid off. Abano’s board is sticking with expansion plans.
Mr Keys said the acquisition plans were a core strategy of Abano, as was increasing its margins, and the company was targeting 25 new transtasman practice acquisitions a year.
When asked if there was a optimal total cap of practices being sought, Mr Keys said Abano’s target over the next decade was to generate $1 billion in transtasman revenue.Abano’s board has repeatedly rejected Healthcare’s offer, saying it is too low and is only for some, not all, of shareholders’ shares.
Healthcare’s offer of $9.94 a share is conditional on reaching a controlling 50.1% stake.Abano chairman Trevor Janes said he was disappointed with the offer extension, given the lack of traction of acceptances to date, and it would become a further cost and distraction for Abano’s board.
Healthcare Partners represents Peter and Anya Hutson and James Reeves, who have already been unsuccessful once in a takeover play for Abano, with a $6.97 per share offer in 2013.In an unusual move, but allowed under the takeover code, Abano withheld payment of a dividend to Healthcare Partners because Abano had incurred more than $700,000 in costs related to the takeover.Abano withheld $653,339 in dividends from Healthcare, with $185,000 of incurred costs outstanding.
Other shareholders are unaffected, and will get their 16c per share dividend.
Mr Keys said much of Abano’s strength lay in its loyal shareholders. He noted the last capital raising several years ago was oversubscribed and almost $100 million in dividends had been returned to shareholders during the past 16 years.
On the question of Abano’s debt, net debt stood at $93million and the company had more than $40 million undrawn in ASB funding. It had no plans to seek any capital from shareholders, he said.‘‘We’re very comfortably within banking covenants,’’ Mr Keys said.
While Abano could not offer to buy out Healthcare Partners, ‘‘post March 3’’, Healthcare would have the options of dropping the offer, making a higher offer or extending the offer date.‘‘It’ll be their decision on whether they stay or not,’’ he said.
Mr Keys said given the level of debt, and undrawn debt, Abano’s balance sheet could not be considered ‘‘lazy’’, and he defended the board’s business strategy and balance sheet as prudent.Healthcare Partners criticised independent adviser Grant Samuel’s valuation range of Abano as using unrealistic assumptions. It was later revised to reflect shares issued as part of management’s long-term incentive scheme, putting a fair value of between $9.92 and $11.93, from $9.95 to $11.96.Abano affirmed annual earnings guidance from the Grant Samuel report, projecting profit of $10.2 million on revenue of $236.2 million. It reported a profit of $28.5 million on revenue of $213.7 million in 2016, although the bottom line included a $21 million gain on asset sales.simon.hartley@odt.co.nz
