Abano Letter to Shareholders

Dear Shareholder



As you may be aware, Australian private equity firm Archer Capital, together with interests associated with Peter Hutson and James Reeves (the “Archer/Hutson Group”), has recently made an unsolicited approach to your Board to acquire Abano.

Separately, we have publicly announced and written to shareholders about a capital raising involving a Share Purchase Plan which is now underway. We have had shareholders ask if the capital raising is proceeding given the publicity surrounding the Archer/Hutson Group approach. The answer is yes. The capital raising process, which was planned and being implemented prior to the initial approach from the Archer/Hutson Group, has been well supported to date.

If you held shares on the record date of 10 September 2013, you are entitled to participate in the Share Purchase Plan and can apply to purchase up to $15,000 of new Abano shares. If you wish to participate in Abano’s Share Purchase Plan, your application should be completed and received by the company by 5pm on 1 October 2013.

The Archer/Hutson Group proposal significantly undervalues Abano

Your Board does not believe the Archer/Hutson Group proposal to be in any way compelling or in the best interests of shareholders as a whole and has rejected it.

The Archer/Hutson Group proposed an indicative price range of $6.97 to $7.14 per Abano share. This significantly undervalues Abano. It does not reflect the current and future value of Abano’s businesses and growth strategy, particularly our dental businesses in New Zealand and Australia.

Archer has also stated that, as well as Peter Hutson and his associates being able to continue to own and invest in the company, they will sell the audiology group to Peter Hutson for a nominal sum, therefore attributing little or no value to it in their indicative price.

Your Board took into account several factors when considering, and rejecting, the Archer/Hutson Group proposal. Some of these factors are detailed on the attached information sheet. In short, the Archer/Hutson Group is pursuing its own interests. Your directors, on the other hand, are focused on the interests of all Abano shareholders.

On behalf of your Board, I thank you and look forward to your ongoing support for Abano.

Trevor Janes

If you are interested in full discussion and commentary, we note respected business writer, Brian Gaynor’s article in the New Zealand Herald on Saturday 21 September 2013. The article can be found at


Abano’s dental business alone could have a value greater than the Archer/Hutson Group’s indicative price for all of Abano

Abano has two well run and managed dental businesses – Lumino in New Zealand and Dental Partners in Australia.

Both businesses are growing strongly, through an acquisition and consolidation strategy, in a trans-Tasman dental market with a size of approximately $9.6 billion in revenue per annum. This market size will provide ongoing opportunities for the implementation of our strategy for many more years.

Your Board believes that both of Abano’s dental businesses will deliver significant value to shareholders. Based on recent transaction multiples in the dental industry, the Abano dental businesses alone could be valued in excess of the Archer/Hutson Group indicative price range for the whole of the Abano Group.

Your Board believes this is the reason the Archer/Hutson Group want to buy Abano. They can see this value and the significant potential and they want to receive this for themselves.

Peter Hutson’s position and his conflict of interest

Peter Hutson’s role as a director of Abano and his involvement in the Archer/Hutson Group proposal raised significant conflicts of interest concerns with the Board. Given this conflict of interest, your Board is pleased that Mr Hutson accepted the Board’s unanimous request for him to resign as a director of Abano. This will reduce the distractions that his presence on the Board has caused.

Mr Hutson, however, remains our partner in Bay International, a business that he has managed as Executive Chairman since November 2009.

Your Board is not prepared to provide information to a potential competitor

Archer has a stated interest in investing in the dental sector and has substantial funds to make investments.

Archer has requested to carry out due diligence on Abano, and particularly the Group’s dental business including practice performance data, details of our dental practice acquisition pipeline and our dentist employment data. Your Board has said no to this request as this would provide a potential competitor with access to commercially sensitive and confidential information in our very valuable dental businesses.

The Archer/Hutson Group has offered a materially inadequate indicative price. This combined with the potential disruption and cost to our business and staff, and the competitive risks, are all factors your Board took into account in deciding it is not appropriate, nor in the best interests of shareholders, to allow due diligence by the Archer/Hutson Group.

Archer Capital does not have an option to purchase shares

After your Board rejected the Archer/Hutson Group proposal, Archer Capital then publicly disclosed that it has entered into exclusivity arrangements with interests associated with Peter Hutson and James Reeves, which together hold approximately 20% of Abano’s shares.

Under those arrangements, the Hutson/Reeves interests have agreed not to sell their shares, or to solicit proposals that may prejudice the Archer Group proposal, for five months. Despite reporting to the contrary, Archer Capital does not have an option to purchase, no agreement to purchase and no commitment from any of these parties to sell to Archer Capital – at least, none which has been disclosed.

The Archer/Hutson Group’s proposal is an endorsement of Abano’s strategy

Abano is your company and your directors are your elected representatives who act in the interests of all Abano’s shareholders. In contrast, Archer Capital is an Australian private equity firm and not a current shareholder in its own right. It exists to make money for itself and its investors – but not for Abano shareholders.

Abano has a track record of success. We have produced significant returns for all our shareholders and we continue to enjoy strong investment support. After returning over $76.5 million dollars to shareholders in recent years, we are currently in the middle of an $18.5 million capital raising. We were pleased that our recent placement of shares was oversubscribed, and we are currently offering you the same opportunity to continue to invest in Abano through the Share Purchase Plan.

We believe the Archer/Hutson Group wishes to buy Abano because they recognise the current and future value of our dental businesses and dental strategy and they want that for themselves. This confirms your Board’s belief that enhancement of shareholder value will be best achieved through the ongoing implementation of our existing growth strategies, and not through the short term sale of the company or the dental businesses.


The Archer/Hutson Group’s insistence on pursuing its undervalued proposal provides an unwelcome and unnecessary distraction, creates some uncertainty for our staff and other stakeholders (including dental groups with which we are engaged in acquisition discussions) and advisory costs that would not otherwise have been incurred.

The Archer/Hutson Group can make a binding offer directly to all Abano shareholders – which would mean they would need to pay Abano’s costs – but they have chosen not to do so, preferring to lobby major shareholders and make use of PR firms.

In short, the Archer/Hutson Group is pursuing its own interests. Your directors, on the other hand, are focused on the interests of all Abano shareholders.

Your Board does not believe the Archer/Hutson Group proposal to be in any way compelling or in the best interests of all shareholders and has rejected it.

Abano Letter to Shareholders 23 September 2013