Abano bid undervalues dental and ignores other units: MD
Archer-led bid undervalues dental and ignores other units, Abano MD Clarke says
By Paul McBeth
Sept. 20 (BusinessDesk) - A potential takeover bid of Abano Healthcare led by private equity firm Archer Capital and involving former director Peter Hutson significantly undervalues the targeted dental business and completely ignores the other units, says managing director Alan Clarke.
Archer Capital, with Hutson, who owns about 15 percent of the specialist healthcare investor, have made an indicative offer of $6.97 a share, valuing Abano at $131.4 million. As part of the deal, an Archer-owned Abano would sell its audiology unit to Hutson for a nominal sum. The shares fell 1.5 percent to $6.60 today.
While the offer is a 19 percent premium to the $5.86 Abano was trading at before it told the market of the potential takeover, it’s well-short of what the healthcare company thinks it is worth. International healthcare group Bupa bought Australasia’s biggest dental group Dental Corp for A$443 million in May this year at a multiple to earnings before interest, tax, depreciation and amortisation of about 9.1 times.
On the same multiple, that would value Abano’s dental unit at about $230 million, meaning the potential bid would be a discount of about 44 percent without ascribing any worth to the audiology, radiology, pathology or orthotics businesses.
“The Archer offer places no value on audiology – they basically said they’re plan is to give the audiology business to Peter Hutson,” Clarke told BusinessDesk. “We take a completely contrary view. We think it has significant future value and good current value.”
Hutson resigned from the board yesterday after his fellow directors urged him to do so, saying he was conflicted by his involvement in the takeover bid.
Substantial shareholder notices this week show Archer Capital, Hutson and James Reeves hold about 19.99 percent of Abano’s shares, and are locked up in a standstill arrangement for the next five months to allow the takeover attempt.
Abano’s board rejected the initial indicative offer from Archer as being too low, and declined its desire to do due diligence on the basis that the private equity firm will likely become a future competitor.
The company has previously fended off takeover attempts by Crescent Capital in 2008 and the Christchurch-based Stewart family a year before that.
Clarke said Abano is upbeat about its dental business in a market where corporate owners hold less than 5 percent of the estimated $9.6 billion trans-Tasman market.
Abano’s dental unit generated gross revenue before commissions of $257.8 million in the 12 months ended May 31, and Clarke said the trans-Tasman market is potentially worth “hundreds and hundreds of millions of dollars.”
The audiology segment, which operates in Australia and South-East Asia, is still in its loss-making development phase, and Clarke anticipates it to break-even in 2015/16.
The company has been shifting its reliance on government-derived income as an ageing population starts to put stress on the public sector’s ability to provide free healthcare.