Oceania Healthcare strategic review resolution - 2026 ASM vote

[ValueNZ]

An Open Letter to the Chair of the Board of Oceania Healthcare


Dear Ms Coutts and members of the Board,

On 30 July, shareholders will vote on Resolution 4, which I have put forward: that the Board commission an independent strategic review of Oceania Healthcare, with the objective of identifying options to maximise shareholder value and to address the long-standing discount of the Company's share price to its net tangible asset backing, and that the Board report the findings of that review to shareholders.

The Board has recommended a vote against. I am writing to respond to the Board's statement, and to ask the Board for the specific thing that would resolve much of this debate at a stroke. That is, release to shareholders the analysis the Board has confirmed it already holds.

The Board asks shareholders to keep waiting for the macroeconomic environment to recover, or for sector related conditions to improve. This plan rests on conditions it does not control and has no timeframe. Against that uncertainty sit attractive alternatives: a sale of the company or an orderly sell-down of the villages, both of which would close most of the value gap between the $0.74 share price and $1.62 NTA per share.

Sale and liquidation must be on the table

In its statement, the Board tells shareholders that its external, independent advisers have already undertaken "financial modelling of the options available to Oceania", including "sector consolidation opportunities, organic and inorganic growth strategies, divestment of individual sites and capital structure / capital management options"  and "a review of the Company's capital structure, including the case for share buybacks." That admission conveniently leaves out a sale of Oceania or an orderly sell-down of all the villages, and it forces the Board onto one of two horns, and there is no third.

Either that analysis examined a full sale of the company, and an orderly wind-down of the portfolio with proceeds returned to shareholders — in which case the review I am asking for substantially exists already, and the only thing missing is its disclosure to the people who own the company. If so, release it.

Or that analysis did not examine those options — in which case the Board has not, in fact, examined the two avenues most likely to close a discount this wide, and a review of these options is plainly warranted.

On either horn, the same conclusion follows: shareholders are entitled to see the analysis, and the options that are most likely to realise book value for shareholders must be put on the table.

Companies should be run in the best interests of their shareholders

When shares trade at less than half the value of the net assets standing behind them, maximising the value of the shares means examining every route to close the gap, including the routes that change or end the company as it exists today.

Yet look at the options the Board says it has considered: sector consolidation, organic and inorganic growth, divestment of individual sites, and capital management. Every single one keeps Oceania intact and operating broadly as it is. The two options that most directly realise the company's balance-sheet worth, a full sale or an orderly wind-down, are conspicuously absent from that list. I simply observe that the options examined are the ones that preserve the status quo, and the options omitted are the ones that don't, and I will leave shareholders to weigh that for themselves.

If Oceania is worth more dead than alive — why shouldn't shareholders harvest the proceeds? That is precisely the question an independent strategic review ought to examine.

The Board's own evidence makes my case

The Board has, in any event, already begun to prove the point for me. It tells us it has sold 14 sites over two years "at or around carrying value." That is the Board confirming, in its own words and fourteen times over, that Oceania's assets realise approximately their book value in real, arm's-length transactions.

So the question Resolution 4 raises is not radical. It is the obvious one. If individual sites reliably fetch around book value, would a more systematic realisation of that same asset base and subsequent capital return deliver more for shareholders than the status quo? The Board's own divestment programme is the single strongest piece of evidence that a legitimate solution to close the value gap between $0.74 and $1.62 is an orderly sell-down of the entire portfolio, with proceeds paid out.

On the cost objection

The Board's precise wording is worth paying attention to. It says it "does not consider the cost of a separate independent strategic review to be warranted." That single word, separate, is doing a great deal of quiet work, because it presupposes exactly what is in dispute: that a complete review already exists, one that my resolution would merely duplicate. Follow that to either of its possible conclusions, and the cost objection collapses.

If a full review, one that thoroughly examined a sale and an orderly wind-down, does already exist, then cost was never the issue. The issue is that the review has not been released to shareholders who have indirectly paid for it.

If such a review does not exist, then what I have proposed is not "separate" or "additional" at all, it is the first proper examination of the options that may realise value at balance-sheet net worth. One cannot dismiss a thing as unnecessary duplication if the work it would supposedly duplicate has never been done.
And in any event, a review costing perhaps one or two million dollars, set against a value gap of $637 million, is a rounding error.

What I am asking

So I ask the Board, plainly, to do two things:

1. Release to shareholders the findings of the analysis the Board has confirmed its advisers have already completed.

2. Confirm whether that analysis examined a full sale of the company and an orderly wind-down of the portfolio. If it did not, commit to an independent strategic review of those options and report the results back to shareholders.

The Board claims to share the objective of having the market better recognise Oceania's underlying value. For that to be true it must consider all options, including a sale of Oceania and orderly sell-down of the villages.

Resolution 4 seeks a full-fledged examination of all of the options to unlock shareholder value, not just the ones that keep the lights on at Quay Street. It asks the Board for nothing beyond transparency and a proper examination of the options. On the Board's own account, much of that work is already done.

To my fellow shareholders

This resolution asks you to risk nothing in exchange for transparency on the single largest question facing the company you own: what can be done to close the gap between the share price around $0.74 and NTA per share of $1.62? If you agree it deserves a proper, independent and reported examination, I urge you to vote FOR Resolution 4.

And please vote your shares directly. Do not appoint the Chair as your proxy and leave the box blank. The Board has stated it will vote every undirected proxy against this resolution. A blank box becomes a vote against the very thing you may wish to support. Mark it FOR yourself, online or on your proxy form, before the deadline of 2.00pm on Tuesday 28 July.


Yours sincerely,

Tommy Scrivener

[Left Field]

Tommy's cunning plan is unfolding....

GLH's

[Dolcile]

Great letter NZValue. I hope you are attending the meeting in person ?

[Basil]

Good letter ValueNZ.  My advice to you and especially Poet in the annual meeting is to really drill down into the NTA and EPS per share value accretion that accrues through buying your own shares back at ~ half NTA as opposed to investing in more real estate that turns each dollar into ~ 50 cents.  In terms of NTA accretion any shares bought back at under half NTA give an instant 100% value accretion.  How can continuing property development possibly give better returns than that ?

The board do not seem to think in EPS terms at any stage, other than when instructed to do so by investment bankers when handing around the begging bowl for a capital raise with the usual "pillow talk" term "EPS accretive" used which is usually less reliable than pillow talk.  This EPS accretive term isn't coming from the board, they are instructed to do this by the investment bankers

Good luck, I've been warning about this mutt for many years.  I think you're banging your head against a brick wall trying to initiate change but I can understand why you want to have a go.

[Buzz]

Good luck, I've been warning about this mutt for many years.  I think you're banging your head against a brick wall trying to initiate change but I can understand why you want to have a go.

Then the Board must go as they are at the heart of this malaise around returns to shareholders. Beginning with Liz Coutts, who penned the attrocious response to the shareholders resolution. It will be interesting to see whether she is indeed vulnerable, as there is a vote on her renewal as well. Certainly not getting my vote this time.

[Basil]

Agree. If they're not nore proactive then steps need to be taken to remove the board if you really want change.

Under section 121b of the companies act if 10% or more of shareholders agree a special meeting can be called and under section 156 formal resolutions be put to the meeting to remove one or more directors.

Significant shareholders will clearly need to be communicating with others to ensure there is a mandate for change as otherwise this will be a waste of time, effort and money.

Good luck.

[Buzz]

Agree. If they're not nore proactive then steps need to be taken to remove the board if you really want change.

Under section 121b of the companies act if 10% or more of shareholders agree a special meeting can be called and under section 156 formal resolutions be put to the meeting to remove one or more directors.

Significant shareholders will clearly need to be communicating with others to ensure there is a mandate for change as otherwise this will be a waste of time, effort and money.

Good luck.

This is very pertinent. If serious change is wanted, it requires serious shareholding backing https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/1656055/shareholdings ... many of these large shareholders need to be supportive, as it requires a simple majority of 50% (albeit non-biding) to be agreed.

Even then, the Board can ignore the resolution as it's non-binding (that might be a mistake for their now, and subsequent reelection), but if the major shareholders agreed, it would be hard if not impossible for them to ignore shareholder sentiment.

Tommy might we well advised to test offline, the large shareholders sentiment, to see if they support or not, the resolution.