A $327 million bid for dental practices business Pacific Smiles Group (ASX: PSQ), backed by Crescent Capital, was rejected by shareholders on 8 August.
Shareholders who voted against the $2.05-a-share bid by National Dental Co (NDC) included rival bidder Genesis Capital which holds a 19.9% stake in Pacific Smiles, and co-founder of the company, Dr Alex Abrahams. Abrahams recently reduced his stake but still held 9.5% at the time of the vote.
Pacific Smiles other co-founder, Alison Hughes, voted her 9.9% stake in favour of NDC’s proposal to acquire the business through a scheme arrangement.
In the vote, 63.31% of total votes cast were in favour of the NDC proposal, representing 81.41% of the shareholders. The proposal failed as it needed to be accepted by a minimum of 75% of votes cast as well as at least 50% of shareholders taking part in the vote.
After Pacific Smiles announced the result of the vote, its share price fell from $2.02 to $1.87.
Announcing the result, Pacific Smiles said it remained open to exploring alternative transactions if considered to be in the best interests of shareholders.
Chair Zita Peach said that after receiving a $1.40-a-share offer from Genesis Capital late last year, the company had sought to elicit an improved offer and had ultimately been successful in that effort.
“While it was always going to be challenging for the NDC scheme to be successful with Genesis Capital stating it would vote against, the board wanted to give the opportunity for shareholders to vote on the NDC scheme,” she said.
On 29 July, Pacific Smiles announced Genesis had made a revised $1.90 a share bid which Genesis said was superior to NDC’s then $1.91 offer as it allowed shareholders the choice of retaining equity stakes.
After NDC lifted its offer to $2.05 a share, Genesis said its offer would remain available for the board’s consideration were shareholders to vote against the NDC scheme.
Pacific Smiles said it was unclear whether the offer was still available for its board to pursue on the same terms and, even if it was, there was no guarantee that any transaction would eventuate.
Peach added: “The Pacific Smiles board will only consider an alternative transaction if it is in the best interests of Pacific Smiles shareholders as a whole.”
She said the board now planned to engage with shareholders, including those that voted against the NDC scheme.
Chief executive Andrew Vidler said the business would continue to operate as normal.
Pacific Smiles expects to release its final results for the 2024 financial year on 28 August.
The Takeovers Panel recently declined a request from Crescent for it to make orders against Genesis over its conduct in connection with its acquisition of its stake in Pacific Smiles.
The panel’s 5 July decision followed it earlier making a declaration of unacceptable circumstances in regard to Genesis’ conduct. This related to Genesis’ level of disclosure on how it converted from having an economic interest in 19.9% of Pacific Smiles through a cash-settled total return swap arrangement in December to becoming the physical owner of the stake on 7 May.
The panel said the market had not been fully informed at all times. However, it concluded it was unable to make orders to remedy the situation that would not unfairly prejudice any person.
The tussle to acquire Pacific Smiles involves former colleagues. The founders of Genesis, Dr Michael Caristo and Chris Yoo, were formerly healthcare investors with Crescent. Crescent’s healthcare sector team is led by the firm’s founder Michael Alscher and partner Daren McKennay who has more than two decades of commercial experience in healthcare.
Pacific Smiles operates more than 120 Pacific Smiles and NIB dental centres in east coast states and manages the operation of HBF Dental Centres in Western Australia.
National Dental Care operates an Australia-wide network of 88 practices.
Genesis established Impression Dental Group in 2021. The group currently operates eight dental centres and a dental laboratory.
Image: Dental surgeries business Pacific Smiles is to remain a listed company, at least for now.