The board of Pacific Smiles told the ASX on Tuesday that its “current intention” was to recommend the higher bid to shareholders, in the absence of a higher offer, and provided an independent expert report concluded the bid was in the best interests of shareholders.
It rejected an original $223 million buyout proposal from Genesis Capital on December 18, with that initial bid of $1.40 per share deemed “opportunistic”.
Pacific Smiles shares had sunk to as low as 90¢ on November 27.
Fragmented sector
Genesis Capital founder Michael Caristo said: “We believe this offer provides a compelling value proposition to Pacific Smiles shareholders, who also have the opportunity to participate in the future performance of the business and roll over into unlisted equity”.
There has been speculation that another private equity player, Crescent Capital, had considered entering the fray. It owns National Dental Care, which has about 60 clinics. But The Australian Financial Review’s Street Talk column on February 22 reported that its interest had waned.
Andrew Vidler, a former executive general manager of retail at Wesfarmers Health, began as the new chief executive of Pacific Smiles two months ago.
Mr Vidler was previously overseeing the Priceline pharmacy chain at the newly established Wesfarmers health division.
Pacific Smiles last month reported that in the six months ended December 31 its operating revenues were up 10.3 per cent to $90 million compared with a year ago, with patient fees up 10.4 per cent to $147.1 million. Net profit after tax for the December half was $4.4 million, compared with $222,000 a year earlier.
Pacific Smiles is the last ASX-listed dental clinic group still operating as a standalone business in a sector that is still highly fragmented. Larger private equity group BGH Capital has been the main consolidator in the industry.
BGH started with a buyout in 2020 of New Zealand-listed Abano Healthcare, which owned Lumino in NZ and Maven Dental in Australia. It then added Australia’s 1300 Smiles Ltd and its 34 practices in 2021.
It bought 22 practices in NZ from health insurance group Bupa in early 2022.
Most dental groups were under serious financial pressure when COVID-19 lockdowns and restrictions resulted in patient visits slowing substantially, but are now recovering.
Pacific Smiles told the ASX on Tuesday it had entered into a formal “process deed” arrangement allowing for some cost reimbursement for Genesis Capital, with confidentiality and standstill agreements in place while the extra due diligence occurs.