NDC loses $327m bid for control of Pacific Smiles despite winning over most shareholders

While Pacific Smiles says it is “open to exploring alternative transactions”, rival suitor Genesis Capital has yet to show its hand after voting against the National Dental Care (NDC) offer at today’s meeting.

NDC was defeated after 63.31 per cent of shares were voted in favour of the proposal by 81.4 per cent of shareholders by number.

For the scheme to pass, it needed at least half of shareholders by number and 75 per cent of total shares. Genesis controls 19.9 per cent of Pacific Smiles shares, which proved to be a major blocker of today's vote.

NDC, which is backed by Crescent Capital Partners, had increased its cash offer for Pacific Smiles from $1.90 to $2.05 per share last week ahead of today’s shareholder meeting.

However, Genesis had earlier upped its previous offer to $1.90 per share via a scheme of arrangement that would provide shareholders the option of all or part of the consideration in scrip.

Based on the terms of the offer, the Pacific Smiles board deemed Genesis Capital’s revised proposal to be superior, but after today’s vote the company says it is “unclear if this remains available to the board to pursue on the same terms”.

“Even if this proposal remains available, there is no guarantee that any transaction will eventuate or on the same terms at all,” says Pacific Smiles.

The defeat meted out to NDC pushed Pacific Smiles shares 7.4 per cent lower by the close to $1.87.

The battle for Pacific Smiles has been underway since December last year when Genesis launched a bid at $1.40 per share, which was rejected by the board. NDC stepped in by April and the suitors have been vying for pole position ever since.

Today's vote was held after Pacific Smiles adjourned an earlier meeting to vote on the NDC proposal after Genesis upped its offer.  

“Throughout this process, the board has focused on maximising value for shareholders, ensuring Pacific Smiles shareholders were well informed and given the opportunity to vote,” says Pacific Smiles chair Zita Peach.

“When we received the $1.40 offer from Genesis Capital, the company sought to explore whether any improved offer could be solicited and, if at the right level, put to shareholders.

“The board ultimately (was) successful in unlocking an offer materially above this initial price and within the top-end of the value range assessed as in the best interest of Pacific Smiles shareholders by the independent expert.

“Whilst 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.”

Ahead of today’s meeting, three major shareholders with a combined 33.35 per cent of shares had indicated they intended to vote in favour of the NDC bid.

The shareholders comprised co-founder Dr Alison Hughes, with a 9.9 per cent stake, HBF Health with 10.03 per cent and MA Financial Group with 13.43 per cent.

“Despite the NDC scheme not proceeding, it has been encouraging to see the level of interest in Pacific Smiles from multiple parties and the endorsement of its brand, network and prospects,” says Peach.

“The board is confident in the strategic position and outlook for the company.

“Going forward, the board and management will focus on delivering a strategic growth framework, supported by the strength of Pacific Smiles’ balance sheet and cashflow generation.”

Pacific Smiles plans to release its full-year results on 28 August 2024.