HIL and Steamboat describe the events leading up to Nov. 26 as "Black November", with a critique commissioned from Korda Mentha suggesting Grant Samuel had overvalued Abano shares by between $2.44 and $2.89 a share.
A mid-point valuation of $6.46 per share was justified, says the Korda Mentha report, which says Grant Samuel's earnings multiples on Abano earnings were too high and should not have included earnings from dental practices not yet acquired.
HIL and Steamboat seek Janes's replacement as chairman in the first step toward replacing the whole board because they believe the company is underperforming. They believe the annual meeting vote can be rerun because, they allege, Janes was wrong to describe himself as an "independent" director of Abano.
That's because he is also deputy chair of the Accident Compensation Corp and a member of ACC's investment committee, thereby creating a "disqualifying relationship" for him under NZX Listing Rules, they allege.
At this stage, the dissident shareholders say they are not making a formal request for a meeting re-run under the Companies Act, but are "giving the company the opportunity to do the right thing."
A spokeswoman for Abano said the company would be responding to the claims "as soon as possible" today.
HIL is also seeking explanations from the Head of Regulation at NZX, where Janes is a member of the Markets Disciplinary Tribunal, about the publication of the Grant Samuel report on the NZX corporate disclosures platform at the same time as the annual meeting.
"The NZX is responsible in the first instance for policing the filing of valuation reports lodged on the NZX platform," Hutson said. He seeks a meeting to discuss "the process by which such a document was able to be loaded onto the NZX platform, given its materiality and relevance to an AGM taking place simultaneously" and "what actions the NZX proposes to take to correct the current position."
Hutson asks how NZX would undertake a review, "mindful of the role of the NZX chairman (Andrew Harmos) as advisor to Abano and the fact that several Abano directors sit on the NZX Disciplinary Tribunal."
Harmos's law firm, Harmos Horton Lusk, advises Abano on legal matters. NZX Regulation also last month granted a waiver for independent directors in relation to ACC board members, effectively deeming Janes an independent at Abano, despite ACC's 6.8 percent shareholding.
"The issuing of a 'unique' waiver last month by the NZX to ACC, and which appears to potentially benefit Mr Janes, raises serious questions," Hutson wrote.
In a letter sent today to the Abano directors, Hutson and Reeves say the company needs "fresh leadership and new standards, starting at the top", a board with relevant skills, and a new approach to executive remuneration based on results.
"Abano's long-run dental earnings before tax, interest, depreciation, and amortisation at 10 percent is less than half that of a typical 'one man band' standalone dental practice," they say. "We believe that Abano's corporate dental model is simply not working. The ballooning debt, calls for investor cash, and flat dividends barely covered by profits, are unacceptable to us as shareholders and are avoidable."
They call for an immediate halt on planned acquisitions of new dental clinics in Australia and New Zealand while the Abano business model is refreshed.
See the letter here:
