Abano walks away from lower North Island DHB pathology tender

Monday 2nd February 2015

Abano Healthcare, the specialist medical investment firm, has quit its bid for pathology work across the lower North Island, saying the terms of the contract on offer weren't workable, and is reviewing the cost the loss of that work will have on its business.

The company's Aotea Pathology unit withdrew from the tender to provide pathology services to the Capital & Coast, Hutt Valley and Wairarapa district health boards after Abano decided the current form of the contract wasn't in its interests, it said in a statement. Abano is reviewing the likely impairment charge it will have to make on the pathology unit, having previously indicated it would need to write off the $11 million book value if it didn't win the contract.

"Our conclusion was that the proposed terms of contract in its current form would not be in the interests of our clinicians and staff at Aotea or Abano’s shareholders and it could well place the existing pathology services and the region’s communities at considerable risk," Abano chief operating officer Richard Keys said. "Our decision to withdraw was not taken lightly. We believe that the current process would result in an outcome that was clinically unsound and financially unsustainable, and with all risk being transferred to the provider."

In 2013, Aotea Pathology's contract with the three DHBs was extended by a year to the end of October 2015 in a deal worth about $26 million, having got a $75 million three-year extension in 2010.

Abano owns 55 percent of Aotea, with ASX-listd Sonic Healthcare holding the remaining 45 percent stake. The business is part of Abano's diagnostic business alongside its radiology interests in Auckland.

Shares of Abano last traded at $8.50, and have gained 9,7 percent this year.

BusinessDesk.co.nz

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