Abano calls dissident shareholders’ bluff with unconditional cash offer
By Pattrick Smellie
April 14 (BusinessDesk) – Abano Healthcare is challenging a dissident shareholders' view of the group’s value by offering a price for 50 percent-owned Bay International well above the valuation given last week in a report for investors Peter Hutson and Michael Reeves.
Abano is offering to buy the 50 percent of Bay, an audiology business, owned by Hutson, for $12.9 million. That compares to a value range of between $6.3 million and $9.4 million for the stake in a report by Korda Mentha, which was issued last week in support of Hutson’s and Reeves’s bid to unseat Abano’s chairman Trevor Janes.
The Korda Mentha report’s findings are at odds with a report for Abano by investment house Grant Samuel, which Janes used to justify rejecting informal takeover bids for Abano that went as high as $7.80 a share from Hutson/Reeves interests, who collectively own 19 percent of Abano. Hutson resigned as an Abano director during the takeover manoeuvrings last year.
Abano shares were trading at $6.41 on the NZX this afternoon, down 1.1 percent on Friday’s closing price.
Abano’s chief operating officer, Richard Keys, told BusinessDesk the company could finance the $12.9 million purchase without stretching its balance sheet, as it had $50 million of undrawn credit facilities and headroom on its banking covenants.
He denied the suggestion the bid was less a serious attempt at ownership than an attempt to prove that Korda Mentha was wrong about the value of the Abano group as a whole.
“What Hutson and Reeves are saying is that the value of Abano should be much lower,” said Keys. “We don’t think that’s so. If they want to sell, we are happy to settle in cash.
“If they accept the valuation of $12.9 million, then that shows the Korda Mentha valuation was too light,” Keys said.
A successful takeover of Bay Audiology would not remove Hutson or Reeves from the Abano register, so they would be free to continue to campaign against the current board and management, whom they accuse of a failed strategy of expansion into Australian dental businesses, which is producing inadequate margins.
Abano argues its expansion strategy requires investment up-front in head office capability and overheads that mean enhanced returns will only be seen once the investment to gain scale has been completed.
Institutional investors canvassed since last week’s announcements of the Hutson and Reeves attempt to re-run parts of last November’s annual meeting had found “strong support for Trevor (Janes), the full board, and the strategy,” said Keys.
In a statement to the NZX, Abano says the purchase of Hutson’s stake in Bay International would “resolve all current management, governance and ownership issues.”
“This offer is a genuine attempt to resolve a long running dispute between interests associated with Mr Hutson and Abano in relation to Bay International,” said Janes. “While our partnership has produced many positive benefits to both shareholders in the past, it is now time for that partnership to end and we hope this helps resolve the issues between us.
“We have previously offered to Mr Hutson to either buy his holding or sell our holding in Bay International and, while that offer was never responded to, we are happy to now make a formal offer at a level which we believe should be an attractive price for both a buyer and a seller.”
Hutson has yet to respond.