Abano Healthcare Group Limited entered into a Scheme Implementation Agreement to acquire a 84% stake in 1300SMILES Limited (ASX:ONT) from Daryl Shane Holmes, Golden Arch (Qld) Pty Ltd, Ellerston Capital Limited and others for approximately AUD 130 million on August 23, 2021. Acquisition will be implemented by way of a Scheme of Arrangement. Founder Shareholders are Daryl Holmes, Managing Director of 1300SMILES and Golden Arch (Qld) Pty Ltd. Abano will pay a blended consideration for Founder and Non-Founder Shareholders of AUD 7 per share for 23,678,384 issues shares of 1300SMILES. Shareholders other than the Founder Shareholders will receive total cash consideration of AUD 8 per share less any Special Dividend. The Founder Shareholders who together hold approximately 59.8% of 1300SMILES will receive cash consideration of up to AUD 6.33 per share (of which up to AUD 0.81 per share is contingent on certain events occurring) less any Special Dividend. The Founder Shareholders will also have the right to make an election to retain 26.227% of their shares on the terms contained in a Retention and Co-Investment Deed. The Founder Shareholders have confirmed to 1300SMILES that they intend to make this election. 1300SMILES intends to declare and pay to all shareholders before the Scheme Implementation Date a Special Dividend of up to AUD 0.8 per Share (reserving the right to increase this to up to AUD 1.1 per Share). Up to AUD 0.81 per share is payable under Contingent Notes to be issued to the Founder Shareholders under the Scheme on the basis of 1 Contingent Note for each share transferred by the Founder Shareholders under the Scheme. Abano Healthcare has obtained commitments to receive funding under a binding Debt Commitment Letter and binding Equity Commitment Letters. The Scheme Implementation Agreement also details circumstances under which a break fee of AUD 1.7 million may be payable by 1300SMILES to Abano. Transaction represents an EV / EBITDA multiple of 13.5x, based on FY21 underlying EBITDA pre AASB 16 of AUD 12.2 million. Sinead Ryan, Stephen Davies and Chris Williams will join 1300SMILES as Directors.

The Scheme is subject to certain conditions including 1300Smiles shareholder approvals, court approval, Australian Foreign Investment Review Board approval, approval under Foreign Acquisitions and Takeovers Act 1975, approval of Australian Competition and Consumer Commission, approval of Australian Securities and Investments Commission, approval of ASX, the Founder Shareholders electing to retain 26.2% of their shares, no Material Adverse Effect or 1300 Smiles Prescribed Events occurring, certain change of control consents being obtained and other conditions precedent which are customary for comparable transactions of this size and type. The Scheme is not subject to a financing condition. 1300SMILES' Independent Board Committee (IBC) considers the proposed Scheme to be in the best interests of shareholders. Based on the advise from Grant Thornton, 1300Smiles' IBC unanimously recommends shareholders vote in favour of the Scheme and each independent director comprising the IBC intends to vote all of the shares that they hold in favour of the Scheme; and the Founder Shareholders intend to vote their shares in favour of the Scheme. Ellerston Capital Limited n intends to vote in favour of the scheme. IBC is comprising of 1300SMILES Independent Chairman, Robert Jones and Independent Director, Jason Smith.

As on October 12, 2021, The General Scheme Meeting and Scheme Meetings are scheduled on November 12, 2021. As on November 12, 2021, transaction is approved by the shareholders of 1300 Smiles. As of November 17, 2021, Federal Court of Australia made orders approving the scheme and it became effective. The suspension is requested in order to facilitate the implementation of the Scheme. The scheme will be effective on November 18, 2021 and implemented on December 1, 2021. As on November 17, 2021, This is currently expected to occur at close of trading on or around December 2, 2021. It is expected that 1300 Smiles will apply for the termination of the quotation of 1300 Smiles Shares on the ASX and its removal from the Official List of the ASX in due course.

End date of the Scheme is March 31, 2022. Grant Thornton Corporate Finance, LLC acted as an independent expert to IBC of 1300SMILES. Flagstaff Partners Pty Ltd acted as financial advisor and Thomson Geer and King & Wood Mallesons, Australia Branch acted as legal advisors to 1300SMILES. PKF Brisbane Audit acted as accountant and Computershare Investor Services Pty Limited acted as registrar to 1300SMILES in the deal. Morgan Stanley (NYSE:MS) acted as a financial advisor to Adams Group parent of Abano Healthcare Group Limited.