Abano shares leap on sale of NZ audiology business

Thursday 27th August 2009

Abano Healthcare Group Ltd is selling its New Zealand audiology interests for $157.8 million in a move that will strengthen its balance sheet, make a one-off capital return to shareholders, and allow the business to concentrate on Asian and Australian audiology opportunities.

The sale of Bay Audiology Ltd is to Abano's 19.5% shareholder, National Hearing Care, which is offering Abano the chance to stay indirectly exposed to the business. Abano has two months to exercise an option to buy between 15%take a stake of up to 18% in NHC, on a 50:50 basis with interests associated with Peter Hutson, Abano's partner in its audiology strategy.

The transaction will see a capital return of around $53 million to shareholders through an early, partially imputed special dividend, and a voluntary pro rata share buyback and cancellation to be completed by late December. The company also intends introducing a dividend reinvestment plan.

"Together, these will equate to over $2 a share," the company said in a statement to the NZX.

Shares in Abano, a diversified medical services franchise operator, leapt 17% to $7 immediately after the announcement this morning.

Abano chief financial officer Richard Keys told BusinessWire that NHC had approached Abano to buy all its audiology businesses, which include fast-growing operations in Australia, Malaysia, Singapore, and Hong Kong.

However, Abano chose only to sell assets in New Zealand, which the company judges to be a mature market compared to the opportunities offshore, and to potential in other New Zealand healthcare sectors, most particularly radiology.

Abano and Hutson interests will each contribute $11 million to recapitalise the Bay International Ltd audiology business, leaving that company with no debt and making Abano a 50:50 partner in the international venture with Hutson.

Abano bought Bay Audiology from Hutson in 2005 and Hutson has been a key player in the company's international expansion. Abano delivered a 24% increase in net profit in the last financial year, on strong growth in cashflows from dental practices, audiology retailers, and radiology clinics in New Zealand, Australia, and wealthy parts of Asia.

"We are looking forward to replicating the demonstrated success of this partnership into other markets which have substantially larger populatioins and offer exciting growth opportunities," said Abano's chair, Alison Paterson.

The sale will yield $118 million for Abano, which intends to retire $60 million in debt, reducing parent company gearing to around 30%. The transactions will require shareholder approval at the Annual Meeting later this year, with settlement due on November 2.

As part of the deal, Abano will make a short term vendors' loan of $20 million to NHC, to be repaid by May 31 next year, secured against NHC's holding in Abano.

The acquisition raised no competition issues as barriers to entry in the audiology market were low, said Keys.

A put and call arrangement between Abano and Hutson relating to the 30% of Bay Audiology not owned by Abano is extinguished by the proposed transactions.

Businesswire.co.nz

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