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Listed healthcare and medical services provider, Abano Healthcare Group Limited, today announced the signing of an agreement to sell 100 percent of Bay Audiology Limited to National Hearing Care (New Zealand) Limited for $157.8 million.
Abano currently owns 70 percent of Bay Audiology Limited, with interests associated with Peter Hutson holding the balance of 30 percent. Following an approach by Crescent Capital, a conditional agreement has been signed to sell 100 percent of Bay Audiology to National Hearing Care, a company associated with private equity fund manager Crescent Capital Partners.
Chair of Abano Healthcare, Alison Paterson said: “The offer represents very good value for our shareholders as we will realise a capital profit of approximately NZ$70 million.”
The sale will provide cash proceeds of approximately $118 million to Abano which will allow the company to retire approximately $60 million of current New Zealand bank debt, resulting in a strong balance sheet and a debt to debt+equity ratio of less than 30 percent. This will provide Abano with the ability to continue investment into existing businesses which have been identified as offering significant potential and to consider opportunities in other healthcare sectors.
It is the Board’s intention to return approximately $53 million to shareholders through both the payment of an early special interim dividend, which will be partially imputed, and through a voluntary pro rata share buyback and cancellation which will be completed by late December 2009. Together, these will equate to over $2 per share. In addition to this, it is intended that a dividend reinvestment plan will be introduced at the same time, to enable shareholders to reinvest dividends back into the company.
As part of the transaction, a short term vendor loan of up to $20 million will be provided to National Hearing Care, of which $14 million will be from Abano and the remaining $6 million from Bay’s minority shareholders, including interests associated with Peter Hutson. This loan is secured against National Hearing Care’s 19.5 percent shareholding in Abano, accrues interest and will be repaid by 31 May 2010.
At Abano’s request, the offer by National Hearing Care excludes all of Abano’s audiology operations outside New Zealand, including those in Australia, Singapore, Hong Kong and Malaysia, which will continue to be owned by Bay International Limited.
Alison Paterson said: “Abano invested in Bay Audiology Limited in October 2005. Since this time, it has grown to 64 clinics nationwide, with revenues increasing by approximately 30 percent on average per annum. The market environment has also changed over this time, and has become increasingly competitive as new and existing providers compete for customers from our small population base.
“We are delighted with our partnership with Peter Hutson which has enabled us to deliver excellent value to our shareholders. Together, we are looking forward to replicating the demonstrated success of this partnership, into other markets which have substantially larger populations and offer exciting growth opportunities.”
As part of Abano’s future audiology strategy, interests associated with Peter Hutson will increase their shareholding in Bay International from 15 percent to 50 percent and introduce $11 million of equity. The existing put call arrangements between Abano and interests associated with Peter Hutson, which relate to the 30 percent of Bay Audiology which Abano does not own, will be extinguished as part of the transaction.
National Hearing Care is an audiology provider in Australasia with 82 clinics in Australia and 11 in New Zealand. The investment in Bay Audiology will allow National Hearing Care and Bay Audiology an opportunity to realise efficiencies and compete more effectively in the region.
Paul Mirabelle, CEO of NHC Group, said: “The two companies have complementary strengths and a deep commitment to providing excellence in hearing healthcare. This transaction will allow us to deliver even greater levels of service to our clients and will also support the spirit of innovation in both companies.”
Abano and interests associated with Peter Hutson have been offered the option to take up to NZ$30 million of equity (approximately 15 to 18 percent) in the new combined Bay Audiology New Zealand and National Hearing Care entity. If this option is exercised, the resulting investment will be held on a 50:50 basis.
Alison Paterson commented: “Our other audiology businesses in Australia and Asia will retain their point of difference, operating through ‘walk-in’ audiology stores in retail and shopping mall environments and offering the unique self assessment Touchscreen technology. This differentiates us from other providers who predominantly offer their audiology services through a medical centre based model.
“The transaction will leave Abano with significant balance sheet capacity and an ability to pursue our audiology aspirations in Australia and Asia, continue the rollout of our dental strategy in New Zealand and in Australia, and carry on with our investment into radiology in New Zealand, as well as consider new opportunities in other healthcare sectors.
“The Board believes that approval of the sale will be of benefit to all shareholders and the Board (with Peter Hutson abstaining given his direct participation in the transaction) unanimously recommends the transaction to shareholders. KordaMentha have been appointed to provide an Independent Report to shareholders, and this will be forwarded to all shareholders along with the AGM notice in late September.”
Settlement is expected to occur on 2 November 2009, following satisfaction of conditions including approval of the sale by Abano’s shareholders at Abano’s annual meeting to be held on 8 October 2009.