
BGH, OTPP sweeten deal for New Zealand's Abano
BGH Capital and Ontario Teachers’ Pension Plan (OTPP) have improved their take-private offer for New Zealand dentistry chain Abano, reflecting a relatively strong business recovery.
The investors are willing to pay NZ$4.75 per share, which equates to a market capitalization of NZ$125 million ($83 million). Abano’s stock jumped 13% on October 12 in response to the news, closing at NZ$4.30.
BTG and OTPP agreed to buy the company for NZ$5.70 per share – an enterprise valuation of NZ$300 million – last year, but the deal was axed in March due to a material adverse change (MAC) clause following an escalation of COVID-19 lockdown measures in New Zealand and Australia that shuttered the bulk of the company’s operations.
The two sides re-engaged in August, resulting in a new bid of NZ$4.45 per share. They also moved to replace the MAC clause with a list of price reduction scenarios that could see the bid lowered as far as NZ$3.70. Three of the price adjustment scenarios relate specifically to pandemic-related events.
However, since the first lockdowns in March and April, Abano’s performance has exceeded expectations. Unaudited revenue for the four months ended July was NZ$12.6 million, up 9% year-on-year, with underlying EBITDA of NZ$14.7 million. The company has revised its full-year underlying EBITDA projection upwards to NZ$32 million, rising to NZ$42.2 million when government wage subsidies are included.
It attributed the revival to “a combination of deferred demand from the lockdown period, clinicians taking less leave as a result of COVID-19, as well as record numbers of new patients and strong existing patient numbers visiting Abano’s dental practices, in part due to Abano’s digital marketing campaigns,” according to a statement.
Abano is one of the largest operators of its kind in Australasia. As of the original BGH and OTPP bid, it had 23 practices in New Zealand and 116 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 in part to a slowing macro backdrop in Australia and costs related to an IT build-out.
The investors’ decision to pull out of the deal followed gradual elevations of the COVID-19 alert status in Australia and New Zealand during the first half of the year, which eventually led to mandatory dental office closures in both countries. Abano stood down the majority of its staff and kept only a small number of practices open for emergency care.
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