Abano back in play with new bid as the dental company posts $48.7m loss

Abano back in play with new bid from BGH Capital.

Abano Healthcare's board is unanimously recommending shareholders accept a new bid from BGH Capital and Ontario Teachers' Pension Plan, this time at $4.45 per share and subject to certain conditions.

Abano shares surged about 40 per cent to $3.68 as trading commenced on the NZX despite continuing cyber attacks affecting the stock exchange website.

The new bid, which values Abano at $117 million, comes after an original scheme of arrangement offered by the same parties and pitched at $5.70 a share was scrapped due to the Covid-19 crisis.

Under the new scheme, BGH and Ontario have agreed to acquire 100 per cent of Abano subject to specified price reductions of up to a maximum of 75 cents per share if any one of a number of defined "adjustment events" caused by the global pandemic occur.

It does, however, remove their right to terminate the scheme if a "material adverse change" occurs.

Abano's board, led by chairwoman Pip Dunphy, has concluded "on balance" the $4.45 offer "provides shareholders with the ability to realise value for their shares and mitigates the risks of executing the company's strategy in such uncertain times".

"The board unanimously recommends the transaction to shareholders, in the absence of a superior proposal and provided that the scheme price is within the independent adviser's valuation range for Abano shares."

"The dental industry is highly sensitive to the Covid-19 environment," with only limited emergency care able to be provided during level 3 and 4 lockdowns, and the pandemic has had a material impact on Abano's business and cashflows this year," Dunphy said in a statement.

"While Abano is expected to recover to pre-Covid trading levels, the timing of this remains uncertain and the risks of further impacts from Covid-19 can be expected in the near term.

"The new scheme proposal removes the uncertainty of a 'material adverse change' impacting on the settlement of the scheme, and instead, a series of pricing adjustments have been negotiated which contemplate a number of potential adverse events that could occur between today and settlement of the Scheme and quantifies those impacts on the company's value."

The announcement of the new bid coincided with Abano posting a $48.7m net loss after tax, including $45.5m of impairments, for the year to May 31, 2020.

Underlying profit, pre-NZ IFRS 16, was $700,000 and underlying Ebitda was $17.4m pre-NZ IFRS 16 and including wage subsidies of $8.5m (compared with guidance of $17m to $20m).

As at May 31 the company's net drawn bank debt was $134.5m and has since reduced to approximately $123m as at July 31, 2020, with total facilities of approximately $170m.
Abano had to agree to amended banking terms in May to provide for operating requirements and "execution of optimisation initiatives".

"The board remains focused on prudent capital management and preserving cash," the company said in a statement.

No dividend was declared given the uncertainty.

The move to the Level 4 lockdown in New Zealand in late-March and the restrictions in Australia in April saw Abano temporarily close all its practices, with a small number of practices remaining open to provide emergency care.

This led to a drop in Abano's monthly revenue from approximately $29m to almost zero.
The company said it was able to quickly move to a remote working environment, while cancelling or deferring all non-essential spending, reducing management and director remuneration, and agreeing to amended banking terms to existing facilities.