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Dental services company private again

The 13-year-old Tampa-based business, which was taken public in 1997, will be merged with Intelident Solutions Inc.

By KRIS HUNDLEY
Published July 12, 2005


TAMPA - Coast Dental Services Inc. finalized the company's return to private status Monday morning with approval of a management buyout of minority shareholders.

Terek and Adam Diasti, brothers who founded the dental practice management business 13 years ago and took it public in 1997, embraced each other as well as Coast's employees and board members after hearing that no unaffiliated investors opposed the move during the company's annual meeting.

The Diastis, who have served as company executives as well as directors, own about 67 percent of Coast. They are sole owners of Intelident Solutions Inc., which is merging with Coast and paying minority shareholders $9.25 a share. The buyout of remaining shares cost the Diastis $8-million.

Although Intelident will become the parent company of the new entity, Coast will use its name at the 106 dental centers it operates in Florida, Georgia, Virginia and Tennessee. Intelident will take over Coast's headquarters in Tampa's Rocky Point area and retain the management and corporate work force of about 100. Intelident will retain the roughly 750 people employed at Coast's dental centers.

"The change should be seamless," said Adam Diasti, a dentist who has been dental director of Coast Dental Services and president of its Coast P.A. subsidiary. "Patients will see the same dentist, hygienist and office staff, and our employees will find that we're able to focus on operations a little more. It will make life a little easier."

Thomas J. Marler, Coast's chief executive, said 25 percent of the minority shareholders had voted by Monday's meeting, with all votes in favor of the merger.

"If you include the verbal commitments we've heard, I'd say closer to 50 percent of the minority shareholders voted in favor," he said.

But the haste with which the deal came about - and the size of the buyout - raised some eyebrows. Although the Diastis have made no secret of their plan to take Coast private - first making a tender offer to shareholders in March 2003 - this buyout offer was finalized only June 30, then mailed to shareholders last week.

Marler defended the fast turnaround on the merger vote, saying Coast met the state's requirement of 10 days' notice. Coast is not subject to more stringent Securities and Exchange Commission rules because it deregistered from the Nasdaq in April 2004, moving to the less regulated over-the-counter market.

Coast's buyout offer of $9.25 a share was determined by a special committee of Coast's independent directors in consultation with CapitaLink, a Coral Gables financial adviser. The offer was more than double the $4.50 a share the Diastis offered minority shareholders when they first decided to go private in early 2003.

The buyout is more than 160 percent higher than Coast's average closing share price for the year before June 15, when buyout discussions were initiated.

Although Coast went public in 1997 at $8 a share, its price has fluctuated over the years, from a high of $90 a share to a low of 62 cents before a 3-to-1 reverse stock split in 2001. In the past year, the price has hovered around $3 to $4 a share, with little trading. Coast's shares closed at $3.55 on June 15.

Last week, however, before news of the latest buyout offer became public, activity in Coast's stock suddenly heated up, with shares selling for as high as $8.

Marler focused on the buyout offer's premium to Coast's trading price while dismissing complaints that it was only about half the company's tangible book value of nearly $18 a share.

"Book value per share can cause you to misread value on the downside, and it can also cause you to overvalue a company," he said. "Our buyout offer not only represents a significant premium over our own traditional trading range, it is significantly more than the average premium of these transactions."

Despite what Marler said was strong minority shareholder support for Coast's buyout, no private investors attended Monday morning's annual meeting, which lasted 15 minutes. Only company employees, executives and board members were present. After the meeting, Marler and Adam Diasti said privatization will allow the company to focus on operations rather than constant growth. Coast had only 29 offices when it went public and had 128 locations at its height. It now has 28 offices in the Tampa Bay area.

"Being public forces you to do short-term planning," Diasti said. "I feel that we're reaching maturity by slowing down and focusing on fundamentals."

Coast will save $2-million to $3-million a year in public company reporting expenses, Marler said. The company had seen significant savings by deregistering from the Nasdaq a year ago, he said.

"We were able to lower our cost structure and have a higher profit margin," he said.

With as many as 300,000 patient visits a year, Coast is making an effort to retain patients, rather than aggressively market for new ones. "We're focusing on the patients we have, not chasing the ones we don't," Marler said.

Dr. Allen Yaketa Nazeri, a dentist in Palm Desert, Calif., who owns about 7,500 shares of Coast, said he supported the company's buyout offer.

"I've owned Coast stock on and off since the company's inception, and I've profited and lost some money, too," Nazeri said. "But I've always thought it was a good solid company, and the stock was definitely undervalued."

Nazeri, who does training for Coast several times a year, said he learned about the buyout offer from a friend. As of Monday afternoon, he had not received the official offer in the mail.

Because some of the shares he was holding were bought at $3, Nazeri said, he was happy with the buyout offer of $9.25.

"I'm not that sophisticated an investor," he said. "But this stock has been stagnant a long time. I'm just happy they made a decision because I wanted to move on."

--Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.

[Last modified July 12, 2005, 01:26:22]


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