Unsolicited Indicative Proposal Update

Abano Healthcare Group Limited (NZX:ABA) advises that on Friday afternoon (13 September 2013), Australian owned private equity firm Archer Capital, with the support of Abano director Peter Hutson, approached Abano again to reactivate its previous unsolicited indicative proposal.

Although the proposal has not materially changed, the Abano Board (excluding Mr Hutson) has, over the weekend, again carefully considered Archer’s proposal, which now involves:

  • A downwards adjustment of the indicative price range to $6.97 to $7.14 per share, to take account of the recent 13.7 cent dividend and capital raisings (placement and Share Purchase Plan), with the pricing subject to due diligence. Archer prefers a scheme of arrangement structure, given its lower voting threshold and other perceived advantages for Archer.
  • Due diligence information requirements, principally on Abano’s dental business, which may or may not result in the indicative price changing.
  • Audiology business to be divested post-acquisition, for a nominal sum, to interests associated with Peter Hutson.
  • Mr Hutson’s interests are to continue, and potentially increase, their investment in the company including its dental and other businesses. A continued (re) investment opportunity is understood to have been offered to an associate of Mr Hutson, Mr James Reeves, whose interests own approximately 5% of Abano. Archer has advised that no such option has been or is proposed to be offered to any other shareholder.

The non-conflicted members of the Board remain of the view that progressing a possible sale of the company on these terms is not in the interests of the company or all its shareholders.

  • Archer’s indicated price range falls well below the level the Board considers reflects fair value for a 100% control transaction, particularly having regard to prices recently paid for consolidated dental businesses in Australia and the various growth stages of each of Abano’s existing businesses.
  • Archer has said it has a long-standing and well researched interest in the dental sector and has a stated intention to invest into the dental sector. Archer is a well-resourced potential competitor and the information it has requested is confidential and competitively sensitive.
  • Archer’s intended strategy, as advised, is to inject capital, in a private setting, and in conjunction with the Hutson interests, into an apparently more aggressive dental aggregation strategy. The Board notes that any limitation on the pace of the current dental practice aggregation does not flow from any lack of capital but from the realities of the time and management effort required to implement a successful and long term, sustainable integration strategy.
  • The independent directors of the Board are confident in the company, its management, strategic plan and its own assessment of long term value creation. The Board does not believe Archer’s involvement would yield any benefit other than a potential short term liquidity option for shareholders. It notes Archer is not restricted from pursuing any initiatives in accordance with the takeover mechanisms provided under New Zealand law should it wish to do so.

The non-conflicted members of the Board have therefore again rejected the unsolicited approach from Archer Capital and Abano director Peter Hutson. As a consequence of Mr Hutson’s conflicts of interest, the non-conflicted directors have excluded him from their deliberations. Abano is unaware as to whether Archer proposes to continue with its attempts to engage with the company or to withdraw, and accordingly is not in a position to assess what, if any, prospects there are of an offer being forthcoming.

The Board notes that the current Share Purchase Plan (SPP), which opened on the 13th of September 2013, is the second stage of the equity capital raising programme announced to the market on 30 July 2013. After several months of planning, this capital raising programme was in the final stages of being implemented when the first approach was received from Archer and Peter Hutson.

Shareholders should have received their mailed Share Purchase Plan documents and are reminded that application forms and payment must be received by the share registrar, Computershare Investor Services Limited, by 5.00pm on 1 October 2013 (unless the closing date is extended in accordance with the Listing Rules).

Trevor Janes