BGH-owned Abano to buy Australia dentistry business

Abano will take up to 84% of 1300 Smiles through a scheme of arrangement, including a 59.8% stake held by the company's founders. The founders will receive A$6.33 per share and retain the right to roll over a 26.2% interest into the acquisition vehicle. All other shareholders will receive A$8.00 per share.

All shareholders will receive a special dividend of up to A$0.80 per share – potentially rising to A$1.10 per share – ahead of the scheme's implementation, according to a filing.

The non-founder offer represents a 14% premium to 1300 Smiles' August 20 closing price. The stock spiked 13.96% on August 24, in response to the offer, ending the day at A$8.00. This gave the company a market capitalization of approximately A$166 million.

Both BGH and OTPP have made equity commitments to Abano in support of the transaction.

1300 Smiles has 33 full-service dental clinics across Queensland, Sydney, and Adelaide. Over-the-counter revenue reached A$65.8 million for the 12 months ended June 2021, up from A$57.1 million a year earlier. Statutory revenue, which excludes the portion of income retained by self-employed dentists within the company's network rose from A$40.7 million to A$44.9 million.

Over the same period, underlying EBITDA was A$15.2 million and net profit was A$18.9 million, year-on-year gains of 31% and 35%, respectively.

1300 Smiles saw its monthly revenue drop 80% between March and April of 2020 as COVID-19 lockdown measures led to a shuttering of the bulk of operations. Within three months, revenue had rebounded to pre-pandemic levels.

Abano experienced a similar state of flux, which led to BGH and OTPP canceling their proposed NZ$300 million ($218 million) acquisition under the material adverse change (MAC) clause. They reengaged five months later and ended up buying the business for NZ$4.75 per share, compared to NZ$5.70 per COVID-19.

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 reached NZ$244.1 million in 2020, while the company posted underlying EBITDA of NZ$32.7 million and a net loss of NZ$48.7 million.

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• Topics
• Australasia
• Healthcare
• Buyouts
• Australia
• New Zealand
• BGH Capital
• OTPP