Abano says don't sell at $5.20 to Crescent

Directors of Abano Healthcare say shareholders should not sell at the $5.20 a share takeover bid price offered by Australian private equity firm Crescent Capital Partners.

Abano chairman Alison Paterson said yesterday that independent financial advice valued the shares between $5.15 and $5.90 each, a 13.5 per cent premium, at its upper end, on the bid price.

The full takeover bid by Crescent follows an unsuccessful partial bid of $5 a share from Masthead Portfolios which lapsed in December. Crescent has already bought a 10.9 per cent stake in Abano from Rotorua Energy Charitable Trust for $5.15 a share.

Abano is a specialist investor and operator in the private segment of the healthcare and medical services market, focusing on businesses with strong private payment revenue streams.

Though the directors' views were not announced until late in the day, there were a couple of small trades during the afternoon which lifted the stock 1c to a new 6 1/2-year high of $5.10. One parcel of 1000 shares sold at $5.13.

Abano directors said the report by independent adviser KordaMentha (formerly Ferrier Hodgson) noted that the company's performance and re-forecast had increased the adviser's "comfort" in terms of achieving a value towards the $5.90 estimate.

"Abano is at the very early stages of a growth phase, and we appreciate that this will have caused considerable difficulties for the independent adviser," the directors said in a statement to the NZX.

Earnings forecasts were being increased as new agreements and initiatives were consolidated and realised. The directors noted a discounted cashflow valuation showed a range of $5.61 to $7.06 a share, while KordaMentha's recommended range was based more on a "comparable company" ratio analysis.

"The board has difficulty thinking of any other New Zealand companies in a comparable stage of their growth cycle," directors said. They considered the company's growth potential to be significant.

"The company has exceeded all of its forecasts and market guidance since this new business plan was adopted three years ago.

"Your directors ... recommend that you reject the Crescent offer as it does not adequately reflect the value of Abano as a successful and growing company."

The directors also warned that if Crescent became the controlling shareholder, governance would pass to another agenda, apparently including plans to close down the Australian audiology business.

Crescent Capital has previously said it has not ruled out selling off parts of the business, including the audiology division.

The Takeovers Panel forced Crescent to enlarge upon its strategy after Abano queried Crescent, in particular about its plans for the audiology business, considering the private equity firm was a competitor in Australia.

Earlier, Abano reported a 37 per cent increase in half year net profit after tax to $3.8 million, with a 44 per cent rise in revenue to $59.6 million.

- NZPA