SILK Laser Australia Limited operates and franchises a network of clinics that offer non-surgical aesthetic services in Australia and New Zealand.
Days Held144 days
Gross Return2.5%
Event TypeTakeoverSilk Laser Australia, takeover, and profit in 5 months
Silk Laser Australia (SLA), announced that it had signed a scheme implementation agreement (SIA) with Wesfarmers (WES). Despite our view that the deal on the table would not be the only offer, a competing bid did not ultimately eventuate. Ultimately, shareholders are now set to receive $3.35 in cash (including a $0.10 fully franked dividend) on 29 November, concluding an investment that has returned a gross return of 2.5% (or roughly 7.5% annualised).
Events timeline:
Current advice: Closed
Latest Recommendation: 17th November 2023, 11:30am
SLA has now ceased trading after having the scheme approved by the Federal Court (following shareholder approval at the scheme meeting). Shareholders are now set to receive $3.35 in cash (including a $0.10 fully franked dividend) on 29 November, concluding an investment that has returned a gross return of 2.5% (or roughly 7.5% annualised). While the return is a little lower than we would typically target, the initial hope was that we could have seen a competing bid emerge, but nothing ultimately eventuated. We will now cease coverage of SLA, and record the investment in the ‘Closed Trades’ section of the Event Portfolio.
Update: 1st November 2023, 10:00am
With the scheme meeting set for 10 November and the deadline to submit votes fast approaching, it is now time for members to get in our voting preferences for the proposed $3.35 per share acquisition by Wesfarmers (WES). The stock has been trading close to the scheme price, but shareholders will maximise their returns by receiving the dividend that will form part of the total consideration, so it makes sense to hold the stock until completion. To vote, members can visit https://www.investorvote.com.au/Login. The details to access one’s holding can be found on the proxy forms which accompanied the scheme booklet sent out last month. If you do not have a copy of your proxy form, you can contact the registry at 1300 429 201.
Once you have logged into the portal and accessed the section to vote, we recommend members vote ‘FOR’ all proposed resolutions. While we anticipate the vote to overwhelmingly support the proposal, we suggest members vote for the sake of caution. Assuming everything goes to plan (and Federal Court approval is received on 15 November), members will be paid on 29 November, bringing to the conclusion an investment holding period of five months.
Update: 10th October 2023, 12:00pm
SLA released the scheme booklet for the proposed $3.35 (plus a further $0.043 in franking credits) acquisition by Wesfarmers (WES). Like with IVC, we have plenty of time before we need to vote, with the scheme meeting set for 10 November. EC Healthcare was in the bidding process before SLA signed the scheme implementation agreement with WES, so it is by no means impossible to see a late competing bid (although we’re certainly not banking on one). As such, we will refrain from voting until closer to the scheme meeting, so members should keep an eye out for further advice closer to the voting deadline of 8 November.
Update: 26th June 2023, 2:30pm
After it had looked like Wesfarmers (WES) was walking away from SLA, the company announced that it had signed a scheme implementation agreement (SIA) with WES that will see SLA shareholders paid $3.35 in cash per share, inclusive of an allowable $0.10 fully franked dividend. Interestingly, WES had previously declined to increase its offer to match the non-binding proposal submitted by Hong Kong based EC Healthcare but has done so to win approval from the SLA board which has resulted in the execution of the SIA. The fact that WES’ offer is binding may ultimately have been what allowed the SLA board to throw its support behind WES, but there is no mention in the announcement that EC Healthcare has walked away.
The WES offer is subject to standard conditions in a deal of this nature, and there is nothing that stands out as a red flag. In the absence of a competing bid, the likelihood of the WES offer completing is very high, so we are comfortable buying for an arbitrage and/or the chances of EC Healthcare increasing its offer. The major issue is liquidity, with almost half of the company held amongst institutional investors and less than $100m of free float. The investment timeline is expected to be around four months, so ideally, we would like to buy SLA below $3.30 for an attractive annualised return. If today’s trading volumes are any indicator, that may well prove impossible, so we will pay a little more to ensure we don’t miss out if EC Healthcare re-emerges.
We therefore recommend members buy SLA at no higher than $3.31 for a medium-risk, short-term investment. We are classifying SLA as medium risk because of the limited liquidity. At $3.31, we’re looking at a gross return of 2.5% which is a little lower than we would like (7.5% annualised only), so please be strict with the buy limit price.
