BGH, OTPP pull out of New Zealand dentistry deal

It follows government-mandated shutdowns of non-essential dental services in New Zealand and Australia, where Abano also has substantial operations, for an indefinite period as a precaution to stem the transmission of the coronavirus. This development was deemed a material adverse change under the terms of the acquisition and precipitated termination of the transaction.  

No break fees are applicable, and all parties agree they have no remaining liability to each other as a result of the termination. Abano said that it was exploring the potential for further engagement with BGH and OTPP regarding a possible alternative transaction and that the investors had expressed interest. However, no such discussions have been formally held to date. 

BGH and OTPP agreed to acquire the New Zealand-listed company in November last year at an enterprise valuation of NZ$300 million ($180 million) by acquiring all outstanding shares at NZ$5.70 apiece. The offer represented a 63% premium versus the last closing price before Abano disclosed it had received provisional offers. The bid gave the company an equity valuation of NZ$150 million and implied an EBITDA multiple of 8.9x. 

Abano shares had traded in a tight range around NZ$5.30 since the bid but began to slide on March 23, when the company confirmed it would shutter non-essential operations in New Zealand as per government recommendations. This was followed by elevations of the COVID-19 alert status in Australia and New Zealand, leading to mandatory dental office closures in both countries. The stock was trading at NZ$1.68 as of mid-afternoon local time March 31.

"Our immediate focus is to protect the health and wellbeing of our teams and patients. The temporary closure of all our dental practices will have a significant short-term impact, however, we expect the business to rebound once this crisis passes," Richard Keys, CEO of Abano, said in a statement. "This is an unprecedented situation and, like many, we are making decisions with a view to preserving the future of our business and jobs."

Abano is one of the largest operators of its kind in Australasia. As of the BGH and OTPP bid, the company had 23 practices in New Zealand and 116 practices in Australia, equating to 17% and 2% market shares respectively. Revenue improved 8% during 2019 to NZ$338.9 million, although profit declined 66% to NZ7.6 million due to some extent to a slowing macro backdrop in Australia and costs related to an IT build-out. 

As of termination of the BGH and OTPP deal, the majority of staff in New Zealand and Australia have or will be stood down. Abano is seeking government support for its staff in both countries. The company hopes to reinstate employees as soon as restrictions are lifted. Deferred dental appointments will be rebooked at that time. A small number of practices will be kept open to provide emergency care.

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• Topics
• Australasia
• Buyouts
• Healthcare
• GPs
• LPs
• New Zealand
• Australia
• BGH Capital
• OTPP
• coronavirus
• covid-19