SMILES IN LEGAL HITCH

But administrators say court challenge won’t stop dental group sale

A LAST-ditch court challenge to the sale of Gold Coast dental group Smiles Inclusive to a Sydney investment company won’t stop the administrators going ahead with the deal.

On Friday, administrators Luci Palaghia and Timothy Heenan wrote to joint-venture partners (JVPs), dentists and employees naming Genesis Capital as the successful bidder for the company’s assets.

A bid led by Pacific Smiles co-founder Alex Abrahams was not accepted.

Friday’s letter prompted a group of JVPs led by Dr Henry Chen to lodge an application in the Supreme Court in Brisbane seeking orders for the administrators to put an alternative proposal called a deed of company arrangement (DOCA) before creditors for a vote.

The group said its proposal, backed by Smiles’ largest shareholder Phi Long Investment and practices with combined revenue of $25m, offered a better return to secured and unsecured creditors, including shareholders, than the Genesis bid.

It called for the recapitalisation of Smiles and giving JVPs the choice of either being rewarded through the payment of high commission rates, up to 70 per cent, or reverting to their original profit-sharing agreements.

It follows a group of 32 dentists and/or JVPs writing to Deloitte in December stating it would rather leave the company than become part of a new corporate entity following 2½ disastrous years listed on the ASX where the share price plummeted from $1 to as low as 3.5c.

However, Mr Heenan on Monday night told dentists and JVPs that the court case would not stop the administrators pushing ahead with the sale to Genesis as it did not involve an injunction against the sale. A spokesman for the administrators on Tuesday said they were confident all options put forward had been considered.

“The Genesis Capital proposal provides the best possible outcome for all creditors and the best opportunity for the future for the business, its employees and other stakeholders,” he said.

Genesis is proposing to buy 26 of the 49 practices taken to the market by Deloitte after

Smiles fell into voluntary administration in November.

The Bulletin understands Genesis managed to win over a number of dentists and JVPs by stating it would not seek to compel anyone who did not want to become part of the new entity to take part.

To sweeten the deal and ensure that dentists and JVPs stay with the company, it also indicated it would put in place another form of profit sharing with the JVPs through the issuing of special classes of shares.

The profit-sharing agreements were put in place after dentists sold their practices to Smiles and reinvested 40 per cent of the proceeds back into the company.

Despite those agreements, JVPs are listed as unsecured creditors and have been unable to vote on any of the bids for Smiles with the administrators opting for an asset sale.

Meanwhile, CEO Michelle Aquilina has resigned from Smiles.

She is the third CEO since the company listed and was listed as part of Mr Abrahams’ unsuccessful bid for the company.