At the current share price, is it possible that Blackmores Limited (ASX: BKL) could be a takeover target – perhaps by a Chinese business.
Blackmores describes itself as Australia’s leading natural health company. Maurice Blackmore founded the company in the 1930s. Blackmores has a number of different brands, not just the well-recognised Blackmores brand. It operates BioCeuticals, the Blackmores Institute, Fusion Health & Oriental Botanicals, Impromy, IsoWhey and Pure Animal Wellbeing (PAW).
Could Blackmores Be A Takeover Target?
Recently we saw infant formula business Bellamy’s Australia Ltd (ASX: BAL) go into takeover arrangements with a Chinese business after a large bid of around $1.5 billion, or $13.25 per share.
Large Blackmores shareholder Marcus Blackmore (and was the interim CEO) said that a Chinese takeover offer is “top of the mind all of the time” according to reporting by the Australian Financial Review.
Investors are considering the potential for another Chinese buyout, but Blackmores could be in the crosshairs this time.
Blackmores is one of the ASX consumer businesses that rely heavily on direct and indirect Chinese customers for sales and profit growth. It was Asian demand that saw the rapid rise of Blackmores in 2015 and the subsequent tougher periods since then.
Vitamin rival Swisse was acquired by a Chinese business a few years ago for $1.7 billion, so it’s clear there could be Chinese interest.
The FY19 result was not very inspiring. Sales in the China segment were down 15% on the prior year to $122 million. Full year net profit after tax declined by 24% to $53 million. To try to turn things around Blackmores is looking at forming a joint venture with a Chinese partner.
In 2016 Blackmores made a partnership with an Indonesian pharmaceutical company called Kalbe Farma, which saw a 90% rise in Indonesian sales in FY19 – however, the sales from Indonesia are much smaller than China.
Time will tell if Blackmores looks attractive to a potential Chinese suitor, but I’d much rather buy the shares of the growth shares in the free report below for potentially exciting returns.
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