Jilted Abano suitors turn guns on chair, NZX, and Grant Samuel
By Pattrick Smellie
April 10 (BusinessDesk) – A rebel shareholder group that attempted an unsuccessful takeover bid for Abano Healthcare has launched a campaign to unseat chairman Trevor Janes, in a coordinated attack that also questions decisions by NZX Regulation and a valuation by investment house Grant Samuel.
Healthcare Industry and Steamboat Capital, which jointly hold some 19 percent of Abano shares, have also launched a website to publicise their call for a shareholders’ meeting on May 27 to re-run the part of the Nov 26 annual meeting at which Janes, a director since 2005, was re-elected as chairman.
HIL is associated with Peter Hutson and Steamboat with James Reeves, who were involved in an Archer Capital-led takeover bid last year for Abano, which has dental businesses on both sides of the Tasman, as well as diagnostics, rehabilitation and audiology interests.
Janes unveiled a Grant Samuel valuation report at last year’s annual meeting, at the height of the Archer takeover attempt, which valued Abano shares at over $9 apiece.
The Archer indicative bid was initially between $6.97 and $7.14 a share for 100 percent of Abano. In correspondence issued today, Hutson and Reeves say a revised indicative offer of $7.80 a share was never put to shareholders, and that Janes misrepresented the potential for alternative bids, which were never forthcoming, at the annual meeting.
Janes wasn’t immediately available to comment.
HIL and Steamboat describe the events leading up to Nov. 26 as “Black November”, with a critique commissioned from Korda Mentha suggesting Grant Samuel had overvalued Abano shares by between $2.44 and $2.89 a share.
A mid-point valuation of $6.46 per share was justified, says the Korda Mentha report, which says Grant Samuel’s earnings multiples on Abano earnings were too high and should not have included earnings from dental practices not yet acquired.
HIL and Steamboat seek Janes’s replacement as chairman in the first step toward replacing the whole board because they believe the company is underperforming. They believe the annual meeting vote can be rerun because, they allege, Janes was wrong to describe himself as an “independent” director of Abano.
That’s because he is also deputy chair of the Accident Compensation Corp and a member of ACC’s investment committee, thereby creating a “disqualifying relationship” for him under NZX Listing Rules, they allege.
At this stage, the dissident shareholders say they are not making a formal request for a meeting re-run under the Companies Act, but are “giving the company the opportunity to do the right thing.”
A spokeswoman for Abano said the company would be responding to the claims “as soon as possible” today.
HIL is also seeking explanations from the Head of Regulation at NZX, where Janes is a member of the Markets Disciplinary Tribunal, about the publication of the Grant Samuel report on the NZX corporate disclosures platform at the same time as the annual meeting.
“The NZX is responsible in the first instance for policing the filing of valuation reports lodged on the NZX platform,” Hutson said. He seeks a meeting to discuss “the process by which such a document was able to be loaded onto the NZX platform, given its materiality and relevance to an AGM taking place simultaneously” and “what actions the NZX proposes to take to correct the current position.”
Hutson asks how NZX would undertake a review, “mindful of the role of the NZX chairman (Andrew Harmos) as advisor to Abano and the fact that several Abano directors sit on the NZX Disciplinary Tribunal.”
Harmos’s law firm, Harmos Horton Lusk, advises Abano on legal matters. NZX Regulation also last month granted a waiver for independent directors in relation to ACC board members, effectively deeming Janes an independent at Abano, despite ACC’s 6.8 percent shareholding.
“The issuing of a ‘unique’ waiver last month by the NZX to ACC, and which appears to potentially benefit Mr Janes, raises serious questions,” Hutson wrote.
In a letter sent today to the Abano directors, Hutson and Reeves say the company needs “fresh leadership and new standards, starting at the top”, a board with relevant skills, and a new approach to executive remuneration based on results.
“Abano’s long-run dental earnings before tax, interest, depreciation, and amortisation at 10 percent is less than half that of a typical ‘one man band’ standalone dental practice,” they say. “We believe that Abano’s corporate dental model is simply not working. The ballooning debt, calls for investor cash, and flat dividends barely covered by profits, are unacceptable to us as shareholders and are avoidable.”
They call for an immediate halt on planned acquisitions of new dental clinics in Australia and New Zealand while the Abano business model is refreshed.