KEY POINTS:
A bare-knuckled brawl for control of Abano Healthcare was in the offing yesterday after key shareholders indicated they did not fancy Masthead Portfolio's $27 million takeover offer for the company.
Masthead, the investment firm of Christchurch's Stewart family, said it would offer $3.85 a share to lift its holding from around 20 per cent to 51 per cent.
Masthead director Mark Stewart said the price was attractive and "provides Abano shareholders with an opportunity to realise a premium price and one that is considerably higher than recent market prices for Abano shares".
The offer was at a 71.1 per cent premium to Abano's average price over the past 12 months and 13.7 per cent higher than its $3.39 close on Wednesday. Abano shares closed 31c higher at $3.70 yesterday.
"This is a pretty stellar price compared to where this company was, and you'd have to say this market's pretty fickle at the moment," said Stewart.
At the price it is offering, Masthead will likely have to pay around $27 million to gain control of the company. It has arranged a loan from Bank of Scotland secured against its existing stake to fund the offer.
Abano's directors said they would appoint an independent expert to assess the offer and advised shareholders not to accept until they received the report.
However, some large shareholders had already formed a view.
"The current offer doesn't make us want to sell," said Stuart Burns of the Rotorua Energy Charitable Trust, which holds 10.5 per cent. "We see a lot more value in Abano still to come and I suppose that's what Masthead is looking at too.
"It's a well run company that in the last 12 to 18 months has really got on with its growth strategy. We'll be waiting with interest for the valuation the directors have commissioned.
"Our view is that valuation will come in significantly higher than what's being offered at the moment."
The other large shareholder apart from Masthead is Salvus Strategic investments, which owns 5.7 per cent.
Salvus managing director Andrew Couch said of Masthead's offer: "I'm not enamoured of it by any means.
"It's probably no coincidence that this offer's been launched in tandem with a bit of a weak period in the market."
Abano's shares had been rising fairly spectacularly since Masthead acquired its 19.9 per cent stake in October last year. In June the company upgraded its revenue and profit guidance saying it had got better than expected performance from recent acquisitions in its diagnostics, dental and audiology sectors.
Its shares went on to hit a high of $3.85 just before international market turmoil sent them lower again.
While Stewart maintained some of the company's gains were to do with speculation, his company would mount a takeover offer. Couch said Abano's fundamentals had improved to justify the increase and, like Burns, he saw further upside.
Hamilton Hindin Greene broker James Smalley noted that about 75 per cent of the company was held by 50 shareholders.
"It's fairly savvy investors that are probably going to make or break this one and if they have long-term horizons when they're investing, they're less likely to be influenced by short-term volatility on sharemarkets, so it could be a little bit of an uphill struggle for Masthead."
But Masthead has in the past proved it is unafraid of a bit of rough and tumble. Two years ago it prevailed in a tussle for control of plastics company Vertex which involved a bitter boardroom stoush, a legal challenge and personal mud-slinging in the direction of Vertex's managing director Paddy Boyle.
Masthead eventually paid $66 million for Vertex, which was then delisted and merged with Stewart-controlled rival Alto before being flicked on to Australia's Visy last year for about $200 million.
Masthead bought its initial 19.9 per cent of Abano in October last year, for $7 million, or $1.55 a share, including 10 per cent from Eric Watson's Cullen Investments.
In March Masthead bought a 10.1 per cent stake in another healthcare company, Ebos.
Healthy premium
* Masthead Portfolios is seeking to gain 51 per cent control of Abano Healthcare with a $3.85 a share offer.
* Masthead, the investment company of Christchurch's Stewart family, already holds about 20 per cent.
* But large shareholders say the price is not right for the fast-growing company.
