Dental company Abano Healthcare shares jump on takeover offer

Monday, 11 November 2019

A $150m takeover bid has been made for Abano Healthcare which is known as Lumino the Dentists in New Zealand.

Shares in NZX-listed dental company Abano Healthcare jumped nearly 20 per cent this morning after a private equity firm and a pension fund announced their $150 million takeover bid.

Abano, described as the largest dental group in Australasia, has 239 clinics under the Lumino The Dentists brand in New Zealand and Maven Dental Group in Australia.

The company's share price has been climbing since it indicated in July that it had received several expressions of interest.

Now a consortium called Bidco has made a full takeover bid, offering shareholders $5.70 a share, more than $1 above its current price.

The offer is a 63 per cent premium on the stock's $3.50 price in June. On Monday the stock sat at $4.58, jumping 88c to $5.46 by late morning.

Dr Gary Mitchelmore, from Lumino the Dentists in Dannevirke making custom mouthguards for young rugby players. Lumino is the New Zealand brand for Abano's dental business.

Grant Williamson, a broker with Hamilton Hindin Green, said the offer would please 'long suffering' shareholders who had watched the company's share price plummet from above $9 as recently as 2017.

Abano had battled headwinds in the Australian dental market and 'it was only the expressions of interest in the company announced a little while ago that got the price back up again'.

Bidco's backers are private equity firm BGH Capital and the Ontario Teachers' Pension Plan Board (OTPP).

BGH founder Simon Harle said his company had experience in other Australia and New Zealand healthcare investments, and OTPP had been a major shareholder in Heartland Dental, one of the largest dental support organisations in the United States.

'BGH Capital and OTPP see opportunities to invest in and continue growing Abano's dental networks in Australia and New Zealand.'

The offer values Abano's shares at $150m and puts Abano's enterprise value at $300m .

Abano's directors recommended the offer unanimously, saying Bidco's proposal was 'the most compelling value for shareholders'.

Chairman Pip Dunphy said the Bidco offer 'mitigates the risks that would otherwise be involved in delivering the opportunities from executing Abano's strategic plan over time'.

Abano's history stems back to the 1970s and it was previously also involved in pathology, orthotics, radiology and owned Bay Audiology.

But over recent years, it has progressively sold off those interests to concentrate on dentistry. Its last non-dental asset, Ascot Radiology, was sold in February last year.

Abano's colourful past also included a bitter battle with Bay Audiology founder Peter Hutson, a shareholder in Abano who disputed its direction, culminating in a failed takeover bid in 2013 with other parties.

Its decision in 2015 to pull out of pathology included closing its Aotea Pathology joint venture, citing over-reliance on uncertain DHB funding. The move put 250 lab workers' jobs on the line in Wellington.

This year Abano made a net profit of $7.6m for the year to May 31, compared to $12.8m the year before.

The company confirmed on Monday that it still expected to make underlying earnings of $14.4m for the five months to October this year, slightly ahead of the same period a year ago.

Bidco's offer is subject to approval by Abano shareholders, the New Zealand High Court, Overseas Investment Office, and Australian Foreign Investment Review Board. A special shareholders meeting will be held in the first quarter of next year.