Abano — a parting of the ways
01 June, 2016
Some readers will be aware that one of our New Zealand portfolio companies, Abano Healthcare, has had ongoing battles with a small group of dissident shareholders. To recap: shareholder Peter Hutson was once on the board of Abano Healthcare and he ran its 50%/50% audiology joint venture Bay International, which has operations in Australia and Asia.
In 2013, Peter Hutson and associates teamed up with Archer Capital to make a non-binding, conditional bid to buy 100% of Abano Healthcare at an indicative value of $6.97 to $7.14 per share (although no formal bid was actually made). If the indicative bid was successful, Peter Hutson would have bought the other 50% of Bay International for 'a nominal sum'. The conflict of interest was obvious. Following a unanimous request by the Abano board, Peter Hutson subsequently tendered his resignation as a director of Abano and was removed as an executive director of Bay International.
Fast forward to today and Peter Hutson has recently bought Abano's 50% share of Bay International for $32m, using his pre-emptive rights following an unsolicited bid for Abano's stake by an international hearing device manufacturer. As large shareholders in Abano, we are delighted with this outcome. The price compares favourably to Abano's $11.9m book value of its stake in Bay International, and was higher than analysts' valuations. Abano can use the proceeds to advance its dental business by adding to its 180+ dental clinics acquired in Australasia, and focus its efforts on this side of the business.
We have been supportive shareholders in Abano for some time. We were active in voting against the proposal to remove Chairman Trevor Janes as a director of the company and were vocal in our view that the Archer Capital indicative bid undervalued the company at the time. One wonders if Peter Hutson will sell his ~15% stake in Abano Healthcare now that there are no longer any ties between Abano and Bay International. This would represent a complete and final parting of the ways.