Abano sells out of NZ to expand into Asia

Chairwoman Alison Paterson says Abano decided to keep hold of the international business because of its potential. Photo / Paul Estcourt

Abano Healthcare has set its sights on expanding into Asia's hearing aid market after receiving approval from shareholders to sell its New Zealand audiology business.

The NZX-listed company, which has been the subject of three takeover offers in recent years, yesterday got the thumbs up at its annual general meeting to sell its 70 per cent stake in Bay Audiology New Zealand to National Hearing Care.

The other 30 per cent, owned by interests associated with Abano director and Bay Audiology founder Peter Hutson, will also be sold with the deal worth $157.8 million in total.

Approval had to be gained under NZX listing rules because National Hearing Care is a related party.

Its owner, Australian private equity firm Crescent Capital, was left with a 19.7 per cent stake in Abano after failing to gain support for a full takeover last year.

The buy-out will see Bay Audiology's 64 New Zealand clinics added to National Hearing Care's 11 New Zealand clinics and 82 Australian clinics.

However, the deal does not include Abano's audiology business in Australia and Asia.

Abano chairwoman Alison Paterson said Crescent had wanted to buy the international business as well but Abano decided to keep hold of it as it saw "significant" further potential.

Abano managing director Alan Clarke said both Australia and Asia had large populations with untapped potential.

In Australia, where Abano had stakes in 20 clinics, the Government funded all Australians up to A$2000 ($2437) for a hearing aid and the market size was estimated to be worth over A$900 million.

But it was in Asia and China that Clarke said there were much greater opportunities.

Clarke said typically in Australia and New Zealand, between 20 and 25 per cent of people with hearing impairment had hearing aids. But in Asia the penetration rate was just 0.05 per cent to 4 per cent.

Clarke said in China there were just 10 audiologists for a population of 1.3 billion and hearing aids were sold in electronics shops alongside televisions and stereos.

"The hearing aid manufacturers don't like this at all.

"They spend billions on research and development and then they have to put their products into these very unsophisticated distribution systems."

Clarke said it had formed a strategic relationship with the Siemens Hearing Group to help break into the market.

The sale of the New Zealand audiology business would provide cash proceeds of about $118 million to Abano, enabling the company to retire about $60 million of New Zealand bank debt.

Of the $70 million in capital profit from the sale, $53 million would be paid out to shareholders in a special dividend.

Abano's share price closed steady yesterday at $6.45.