No Images? Click here The Australian Financial Review“Street Talk” – Late News Headline today was:- 1300 Smiles battles BGH for dental group Abano Healthcare The columnists reported that 1300 Smiles is seeking to acquire Abano’s Maven Dental Group which has 116 practices. It’s a bold play for 1300 Smiles with $58.9 million of dental fees compared to Maven NZD$179 million. However, it looks like private equity group BGH has the pole position to take over Abano in full. We assume that there might be some side talk as to whether BGH, if successful, would allow 1300 Smiles to participate in its deal to the extent of acquiring Maven. That’s speculation on our part. Maven has many more practices than 1300 Smiles but we understand that it stopped buying practices because new acquisitions weren’t making money. A sensible course would be for a corporate buyer to carefully assess each of the practices in the Maven Group and be prepared to ruthlessly dispense with the non-performers by selling them back into the ordinary dental market. That kind of managerial portfolio culling is what effective managers do in big organisations. Apart from this business logic 101 indicates that it’s simply too big a jump for 1300 Smiles with 30 plus practices to acquire and run a further 116 practices ie. a fourfold increase in its business. Many a business has failed by making a “too big” acquisition. Smiles Inclusive – Capital Raising What was touted as an institutional capital raising has dwindled to a one for one pro rata accelerated – non-renounceable (rights) entitlement offer to existing shareholders at 5 cents per share conducted on Wednesday (today) 25th September 2019 to Thursday 26th September 2019 (tomorrow) which doesn’t give many of the shareholders much time to react. The SIL story gets stranger by the day. Entitlements not taken up in this accelerated offer will form a Retail Entitlement Offer proposed to open on 2 October 2019 and close on 11 October 2019. The announcement indicates that SIL’s directors have committed to take up their rights as part of the accelerated offer and the directors have also agreed to sub-underwrite the Retail Entitlement Offer of which the primary underwriter is Morgans Corporate Limited. The Disappearing Institutional Component! Since the previous announcement of 23rd September 2019 referred to a trading halt pending the outcome of its institutional component of the accelerated entitlement offer – it is apparent that since this announcement makes no mention of the institutional component that it could not get the desired response. Institutions would be understandably wary about putting money into a company which had a series of “please explain” notices from the stock market and whose auditors have as yet been unable to sign off its financials. The offer being underwritten will raise $3.33 million less the cost of the offer of $0.25 million for a net $3.08 million. As the source and use of fund statement indicates the $3.08 million is not going to stretch very far. Our Conclusion Smiles Inclusive will buy itself a bit more time with this capital raising and are likely to require the directors to dip into their own pockets as sub-underwriters. As KPMG auditors are booking substantial additional impairments it indicates that this is a company on life support. It won’t be surprising if a number of the existing shareholders don’t take up the offer and that a fair amount of it ends up being forcibly taken up by the directors. The Dental Career of Michael Timoney Mike Timoney who had previously run Bartercard in the UK was associated with Dental Partners Limited mark one, which was quietly put to bed after a number of statements made about the company were found to be misleading. Mike subsequently was the driving force in Dental Partners Limited mark two, a company with a different ACN number which he ran as CEO until that company was sold to Abano Corporation, a New Zealand company, with Mike accompanying the sale and becoming an Abano executive. Subsequently there were reports of Abano severing his services and of legal action. Such matters normally settled out of court with a confidentiality clause. In its letter to Smiles Inclusive’s shareholders of the 26th April 2019 available at the company’s ASIC website Mr Peter Evans, Mr David Usasz and Ms Tracy Penn, its directors rebutted a series of allegations made by Mr Timoney and by Mr David Herlihy and indicated that “The company (Smiles Inclusive) had been in contact with Mr Timoney’s former employer, Abano, who confirmed that the company had been forced to terminate Mr Timoney’s employment”. Subsequent to his termination by Abano, Mike Timoney was the moving force in founding Smiles Inclusive Limited receiving 9,677,000 shares for his efforts valued initially at $1.00 per share. A significant reward amounting to 16.7% of the company. However, he had the unhappy experience of his judgement being called into question following the disastrous acquisition of a mobile dental facility which got into trouble for taking x-rays of school children’s mouths without a radiation licence. This was followed by substantial profit downgrade and his being forced to step down from the Chief Executive Officer role in the company. Subsequently there were a series of announcements concerning a fight over board positions with forces aligned with Mr Timoney eventually losing out to the current board members. We heard a rumour that Mr Timoney was trying to set up yet another dental company. If true, that would seem to be a brave move indeed! Best wishes to all dentists, GRAHAM MIDDLETON The Synstrat Group are Australia's most experienced Dental practice business advisers, accountants, practice valuers and licensed financial advisers. The information contained herein is of a general nature and no specific action should be taken without individual advice. Synstrat Management Pty Ltd P. 03 9843 7777 ABN 57 006 295 325 If you are not the intended recipient of this communication please delete and destroy all copies of this message and telephone Synstrat on +61 3 9843 7777 immediately. If you are the intended recipient of this communication you should not copy, disclose or distribute this communication without the authority of Synstrat. Any views expressed in this communication are those of the individual sender, except wh ere the sender specifically states them to be the views of Synstrat. If you do not wish to receive this email in future, please reply to the sender requesting termination of service. |