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Alan Clarke stands to make a million if Crescent gets hold of his company. But he won't budge. Garry Sheeran finds out why.
Alan Clarke has a million reasons why he doesn't want to see his company, Abano Healthcare, snapped up by Australian private equity interests.
Because $1m is what Clarke would get if Crescent Capital Partners is successful with its $5.20-a-share bid for the company. "That $1m is a huge part of my net wealth, but I'm looking forward to getting more shares in the company, not selling," said Abano's South African-born managing director.
Having skin in the game is a smart ploy for business people. It demonstrates to investors they are prepared to bet their own future on that of their company.
In reality Clarke's 203,138 Abano shares at less than 1% of the company's share capital are not a lot of skin. And even Clarke will admit the Crescent offer is good. The trouble is, it's not good enough. And that's why he, and his board, are pulling out all stops to have shareholders reject the bid.
Crescent complains Abano is shifting the goal posts to dissuade shareholders from taking healthy capital gains by accepting the latest offer.
The Sunday Star-Times understands that after shareholders gave Masthead Equities' earlier $5-a-share bid the cold shoulder, Crescent made informal approaches about a $5.10 bid, only to be told to up the ante.
This they did, only to find Abano revised its financial forecasts significantly upwards in two months.
But Clarke said the upward revision of forecasts was based on actual achievement, albeit in short time.
"In revenue and profit terms, Abano is growing 25% a year, and that is what people are failing to get their heads around."
It was only two years ago that the Abano share price dipped below $1, and Clarke admits he was "really concerned".
In 2000 he had taken the reins at Abano, then called Eldercare, an Eric Watson company which he quickly decided was in deep trouble.
He decided owning nursing homes and retirement villages was not the way to go, sold that business, repaid debt and branched into the wider healthcare and medical services sector.
Abano first bought an audiology business as the company began to invest in the health services sector.
"Then we were having to tender to retain a [district health board] pathology contract in Wellington, and, as the second preferred provider, the market was doubly nervous," said Clarke.
But having several years' experience in Australia buying healthcare-related businesses, he knew the potential for a listed company investing in the biggest-spending sector of the economy.
Abano has added radiology and dentistry to its suite of healthcare investments. It also has interests in rehabilitation and orthotic services.
Unlike similar ASX-listed healthcare companies, Abano did not buy medical businesses outright, but entered into joint venture arrangements so doctors and other clinicians could own a 30% stake and continue to run the businesses.
"We provide funding, sit on boards, bring financial and other disciplines to the business, work with doctors to develop strategies to grow," said Clarke.
It's a formula he believes is paying big dividends, realised spectacularly by Masthead's Mark Stewart when he bought Eric Watson's near 20% stake in Abano for $1.55 in October 2006. The share had been trading at $1.33.
A good six-month result six weeks later saw share price in a dizzy rise to its current $5-level.
So is there a price Abano directors would accept for the company?
Clarke said: "There clearly is, but we have yet to determine what that is."
"We tell our partners in our businesses that they need to understand one thing about dealing with private equity. They will put you in a pink tutu, put lipstick on you and flog you off to the highest bidder in a three to five-year timeframe," said Clarke.
"But I want to marry you and have kids. That's the difference."
- Sunday Star Times