Blackmores (BKL:ASX)

Last update - 19 July 2023 By Shannon Rivkin

Blackmores Limited is an Australian health supplements company founded in the 1930s by naturopath Maurice Blackmore, when Blackmore opened the first health food shop in Australia in Brisbane, Queensland.

Days Held83 days Gross Return3.67%Event TypeTakeover

Blackmores, takeover and profit in 3 months

BKL, a long-rumoured takeover candidate, announced a binding deal with beverage giant Kirin at $95.00 plus roughly $1.41 in franking credits. Despite our view that the deal on the table was likely to be the only offer, the return on offer for what was a low-risk parking spot was well above cash in the bank. Ultimately, members returned a gross profit of 3.67% in roughly three months.



Events timeline:

Current advice: Closed.

Latest Recommendation: 19th July 2023, 2:30pm

BKL held the scheme meeting yesterday for shareholders to vote on the proposed acquisition by Kirin. As expected, the deal was supported by an overwhelming majority of shareholders, with roughly 97% of shares voted in support. Some minor conditions (such as Federal Court approval) remain outstanding, but the anticipated timeline is the stock will now cease trading from the close of trade on 21 July, with payment due on 10 August.

Shareholders will receive a capital payment of $91.71, as well as a fully franked dividend of $3.29 (and attached franking credits of $1.41). While not all members were able to get set at our original entry price of $93.00, the gross return for those members that did buy the stock at that price was a solid if unspectacular 3.7% for a holding period of 3.5 months (or annualised at around 12.5%). Even though we saw no competing bids throughout the process, the return was well worth it for the low-risk nature of the deal. We will now cease coverage of BKL.

23rd June 2023, 10:15 am

Members should by now have received their Scheme Booklets for the upcoming scheme meeting to vote on the proposed acquisition by Kirin. The scheme meeting will be held on 18 July, with votes due by 16 July. Assuming there are no competing bidders and everything goes according to plan, BKL shares will cease trading at the close of trade on 21 July, with payment due on 10 August.

With the record date set for early July, we are now within the forty-five-day holding period, so anyone buying the stock will not be eligible for the $1.43 in franking credits attached to the special dividend. We are therefore changing our buy recommendation to a hold.

While we don’t anticipate a competing bid at this stage, it always makes sense to leave our options open. We will therefore provide voting advice closer to the 16 July deadline.

Update: 27th April 2023, 10:15 am

BKL this morning announced that it has signed a binding scheme implementation agreement with long-time suitor Kirin which will see BKL shareholders paid $95.00 per share plus franking credits of up to $1.43 per share. BKL has recently been trading strongly as rumors circled that either private equity or Kirin was engaged with the company. The offer comes at a good premium to recent trading levels and has the support of both the board and major shareholders. Additionally, it’s hard to see any of the regulatory obstacles (such as ACCC or FIRB approval) posing much of a problem, so it’s highly likely the current offer succeeds in the absence of a competing bidder. Chinese regulatory approvals are also needed which is harder to read, but it’s likely Kirin is seen as a good owner by regulators. While we don’t expect a competing bidder, one certainly can’t be ruled out, but we wish to buy BKL for the arbitrage, so we will be strict on price.

The scheme meeting is expected to be held in July, which means payment should come in August. All up, it looks like a holding time of less than four months. Ideally, we would like to buy for a 3-4% upside in order to achieve the desired 10+% annualized return. We are therefore recommending members buy BKL at $93.00 or below for a low-risk, short-term investment opportunity.

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