The Wesfarmers Ltd (ASX: WES) share price is under the spotlight after announcing a takeover bid for Silk Laser Australia Ltd (ASX: SLA).
Wesfarmers is the owner of Bunnings, Kmart, Officeworks and Priceline. Silk Laser is one of the largest non-surgical aesthetics clinic operators in Australia and New Zealand with more than 140 clinics.
Takeover proposal
Wesfarmers has entered into a ‘transaction process deed’ with Silk Laser after a non-binding, indicative offer to buy all the shares of the $3.15 cash per share.
The offer represented a 30.2% premium to the closing price of $2.42 per share on 19 April 2023.
Silk Laser noted the takeover offer allows for the payment of a fully franked dividend of up to 10 cents per share, with any dividends paid reducing the offer price.
The offer is still subject to a number of conditions including completing satisfactory due diligence, receiving required regulatory approvals and so on.
Wesfarmers’ offer represents an implied equity value for Silk Laser of approximately $169 million.
The Silk board has granted Wesfarmers of up to 30 business days to undertake exclusive due diligence to check over Silk’s financial numbers and to negotiate a takeover.
Offer approved by Silk board
It looks like the offer has a good chance of success because of two reasons. The Silk board of directors has confirmed that it intends to unanimously recommend to its shareholders that they vote in favour of the takeover and each Silk director intends to vote any Silk shares they control in favour of the scheme.
One of Silk’s largest institutional shareholders, Wilson Asset Management (WAM), owns approximately 9.3% of Silk’s outstanding shares. WAM has confirmed the support for the indicative proposal and has entered into a voting agreement with Wesfarmers which is subject to there being no superior proposal and an independent expert’s review concluding and continuing to conclude that the scheme is in the interests of Silk’s shareholders.
Final thoughts on the offer
I can understand why Wesfarmers wants to buy Silk Laster, as it would fit in nicely within the Australian Pharmaceutical Industries (API) business which it acquired, and API owns Clear Skincare Clinics.
Compared to the overall size of Wesfarmers, it’s a small takeover. But, I think that helps make it a manageable deal and doesn’t require any major funding moves.
I do think the Wesfarmers share price is a buy for the long-term. The potential long-term growth of the healthcare division is exciting.
