Healthcare-Abano takeover costs dispute could set a precedent

Abano chief executive Richard Keys would have liked to settle out of court

Takeovers Panel CEO Andrew Hudson on the Abano takeover costs case

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The last court battle over a failed takeover’s costs is about to get under way in the Auckland High Court this week.

The dispute is over what reasonable costs Abano Healthcare should be reimbursed for after the partial takeover attempt by Healthcare Partners failed in March last year.

Abano claims Healthcare still owes it more than $566,000 after it withheld nearly $523,000 in dividends due Healthcare in January to partly cover those costs – the disputed amount from the following dividend is being held in escrow until the dispute has been settled.

Healthcare is disputing just about every aspect of Abano’s invoices and also claims Abano has oppressed it as a minority shareholder by withholding its dividends.

Under an amendment to the Takeovers Act last year, any such disputes in future will be decided by the Takeovers Panel, rather than the more expensive recourse to the courts.

Takeovers Panel chief executive Andrew Hudson says the Abano case could create precedents for the panel to follow in future disputes.

“It is a little bit of an end of an era,” Mr Hudson says, adding that the law does provide for directors of a target company and the company itself to be reimbursed for properly incurred expenses when a takeover offer fails.

Healthcare’s offer failed spectacularly, with it gaining acceptances from owners of just 2.35% of Abano’s shares. It had wanted to take its 19% stake to just above 50% in its third attempt to win control of Abano.

Only old case law to go by
“There’s a legal test for what expenses are properly incurred and the legal test comes from the common law,” Mr Hudson says.

“The panel in its guidance has stated that it will apply the principles and, in particular, the Canterbury Frozen Meat Company case.”

That case, which revolved around Canterbury’s attempt to take over the Waitaki Farmers' Freezing Company, dates all the way back to 1972.

There have been other similar disputes since then, such as the Canada Pension Plan Investment Board’s attempt to take over Auckland International Airport and the Briscoe Group’s attempt to take over Kathmandu but these disputes were settled out of court and so set no precedents.

It is always possible that the Abano dispute will settle out of court too but it wasn’t looking promising late last week.

Healthcare shareholders Peter Hutson and James Reeves didn’t respond to texts last week and Abano chief executive Richard Keys said his company “would have liked to have resolved this by agreement but, consistent with their previous behaviour, this has not been possible.”

In December, Justice Peter Woodhouse of the High Court ruled on a number of disputes between the parties, mostly in Abano’s favour.

Healthcare sold its 19% stake in Abano in August last year for $36.7 million and the costs dispute is its last remaining connection to Abano.

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