Abano Healthcare is seeking advice on whether one of its directors can effectively discharge his duties while he is a party to a hostile takeover.
The private equity firm, Archer Capital has reached an agreement with Abano director Peter Hutson and and associated shareholder James Reeves, who between them own just under 20 percent of Abano, to a 150 day lockup of their holdings pending a possible takeover offer.
Abano says Mr Hutson and Mr Reeves agreed to the lockup for no apparent consideration and Archer has made no commitment to launch an offer.
On Monday Abano said that if Archer succeeds in taking over Abano, it plans to sell Mr Hutson Abano's share of their jointly-owned fledgling audiology business in Australia and Asia for a nominal sum.
Abano's chairman, Trevor Janes, says Mr Hutson's various conflicts of interest will be difficult to manage.
Mr Janes says the company was told there was no formal agreement between Archer, Mr Hutson and Mr Reeves.
And he doesn't know whether Archer Capital and Mr Hutson will mount an on-market takeover offer.
Mr Hutson, who is an Abano director and is also its joint-venture partner in developing its audiology business, and Archer were willing to pay $6.97-$7.14 per share for Abano, valuing the company at $134.6 million.
Abano managing director Alan Clarke said his company's dental operations alone are worth about $250 million and the fledgling ideology business, which Archer proposes to sell to Mr Hutson for a nominal sum, already has significant value.
"We had a meeting with them on Friday. They indicated that they have researched the dental sector extensively. Therefore they believe that this is a good entry point for them," Mr Clarke said.
"They didn't indicate what their next steps would be other than they reaffirmed their very strong interest in the process and our conclusion is that if they've come back a second time, it is possible that they may come back again. However, we will only know that when it happens."
Archer had indicated it was a potential competitor in the dental sector, and Abano had on that basis refused them a due diligence look at the company, he said.
"In addition to that, we are for sale every day. It's called the New Zealand Stock Exchange and they do wish to increase their holding or to enter the registry, they're very welcome to make an approach on that basis."
Archer and Mr Hutson had wanted Abano's board to agree to a scheme of arrangement, which would have required approval from only 75% of shareholders.
An on-market bid would require acceptance from 90% of shareholders before the bidders could move to compulsory acquisition.
Taken by surprise
Though Abano was taken by surprise, Mr Janes said the company is trying to prepare for several possible outcomes.
"We're trying to be prepared to make sure that the shareholders get the best value for their investment, whether that's by way of an acquisition or continuation of the business plan that we have in train," he says.
He says the board has a track record of trying to achieve the best outcomes for its shareholders and that is something it will continue.
