UPDATED: The brinksmanship between Abano Healthcare Group [NZX: ABA] and two shareholders owning 19 percent of the company continues, with 15 percent shareholder Peter Hutson rejecting a bid from Abano for the 50 percent of Bay International that he owns.
Abano owns the other half of Bay, a chain of audiology businesses, and is offering $12.9 million in an unconditional cash offer, which the company says would resolve "all current management, governance and ownership issues."
However, a spokesman for Hutson and fellow rebel shareholder James Reeves, said they would not be entertaining the offer and that their objective remained the unseating of incumbent chairman Trevor Janes.
"This is a red herring that is designed to deflect from the core issues namely that of the poor performance of the Dental division and the increasing failures in corporate governance," the spokesman said.
Hutson and Reeves, acting as Healthcare Industry Ltd and Steamboat Capital, have given Abano until April 16 to respond to their call last week for a special shareholders' meeting to rerun the part of the Nov. 26 annual meeting at which Janes was re-elected chair.
Abano, and Janes himself, have ruled out that happening. At this stage, Hutson and Reeves have only called for the meeting and have yet to set in train the process that would require a meeting to be held.
An extraordinary general meeting can be called at the request of 5 percent of a company's shareholders, which the pair's shareholdings easily exceed. They have nominated May 27 for a shareholders' meeting.
Both sides claim high levels of institutional investor support for their stances.
Hutson was a director of Abano last September during an attempt by Hutson and Reeves to mount a full takeover bid for Abano pitched as high as $7.80 a share, but which Janes rejected, relying in part on a report by investment house Grant Samuel, which Hutson and Reeves says gave an inflated valuation.
They issued an alternative valuation report from Korda Mentha, which valued Hutson's Bay Audiology stake at between $6.3 million and $9.4 million, compared with the $12.9 million cash offer made by Abano today.
While Hutson and Reeves argue Abano has ballooning debt levels, the company's chief operating officer, Richard Keys, told BusinessDesk today the company could afford to pay cash for 50 percent of Bay, using uncommitted bank funding lines of up to $50 million, and that the company have banking covenant headroom for such a transaction.
EARLIER: Abano Healthcare [NZX: ABA] is challenging a dissident shareholder 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.