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Abano agrees Bay Audiology sale in $157.8m deal

Thursday 27 Aug 2009 10:56 a.m.

Abano Healthcare Group has signed a deal to sell New Zealand audiology business Bay Audiology to National Hearing Care for $157.8 million.

Abano today said it owned 70 percent of Bay Audiology, with interests associated with Abano director Peter Hutson holding the remaining 30 percent.

Following an approach by Crescent Capital, a conditional agreement had been signed to sell 100 percent of Bay Audiology to National Hearing Care, a company associated with private equity fund manager Crescent Capital Partners, Abano said.

National Hearing Care has 82 audiology clinics in Australia and 11 in this country.

Abano Healthcare chairwoman Alison Paterson said the offer would realise a capital profit of about $70m.

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

That would provide Abano with the ability to continue investment into existing businesses which had been identified as offering significant potential and to consider opportunities in o ther healthcare sectors.

It was the board's intention to return about $53m to shareholders, Abano said.

That would be through both the payment of an early special interim dividend, which would be partially imputed, and through a voluntary pro rata share buyback and cancellation to be completed by late December 2009.

Together, those will equate to over $2 per share. It was also intended to introduce a dividend reinvestment plan.

As part of the transaction, a short term vendor loan of up to $20m would be provided to National Hearing Care, of which $14m would be from Abano and the remaining $6m from Bay's minority shareholders, including interests associated with Mr Hutson.

That loan was secured against National Hearing Care's 19.5 percent shareholding in Abano, and would be repaid by May 31, 2010.

The offer excluded all of Abano's audiology operations outside this country -- including those in Australia, Singapore, Hong Kong and Malaysia -- which would continue to be owned by Bay International.

Mrs Paterson said Abano invested in Bay Audiology in October 2005, and since that time it had grown to 64 clinics nationwide, with revenues increasing by about 30 percent on average per year.

The market had become increasingly competitive as new and existing providers competed for customers.

As part of Abano's future audiology strategy, interests associated with Mr Hutson would increase their shareholding in Bay International from 15 percent to 50 percent and introduce $11m of equity.

Abano and interests associated with Mr Hutson had been offered the option to take up to $30m of equity (about 15 to 18 percent) in the new combined Bay Audiology New Zealand and National Hearing Care entity.

If that option was exercised, the resulting investment will be held on a 50:50 basis, Abano said.

Mrs Paterson said the deal would leave Abano with an ability to pursue its audiology aspirations in Australia and Asia, continue the rollout of the company's dental strategy in New Zealand and Australia, and carry on with its investment into radiology in New Zealand. It would also consider new opportunities in other healthcare sectors. The board, with Mr Hutson abstaining given his direct participation in the deal, unanimously recommended the transaction to shareholders.

KordaMentha was to provide an independent report to shareholders, which would go to all shareholders along with the AGM notice in late September.

Settlement was expected on November 2, following the satisfaction of conditions including approval of the sale by Abano's shareholders at Abano's annual meeting on October 8.


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