ABA
23/09/2013 13:21
TAKEOVER
REL: 1321 HRS Abano Healthcare Group Limited
TAKEOVER: ABA: Letter to Shareholders
Dear Shareholder
- ABANO'S SHARE PURCHASE PLAN
- YOUR BOARD'S VIEW OF THE ARCHER/HUTSON GROUP PROPOSAL
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
Chairman
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
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11127843
THE DETAIL SURROUNDING THE ARCHER/HUTSON GROUP PROPOSAL
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.
CONCLUSION
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.
End CA:00241441 For:ABA Type:TAKEOVER Time:2013-09-23 13:21:21
