The McPherson's Ltd (ASX: MCP) share price is surging notably higher on Thursday morning.
At the time of writing, the personal care and beauty products company's shares are up 14% to $1.39.
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Why is the McPherson's share price surging higher?
Investors have been fighting to get hold of shares this morning after McPherson's announced the receipt of a takeover approach.
According to the release, Gallin Pty Ltd has made an unconditional on-market takeover offer of $1.34 cash per share.
While this represents a 9.8% premium to its last close price, it is a very opportunistic 60% discount to its 52-week high.
What is Gallin Pty Ltd?
A separate release explains that Gallin has been incorporated specifically for the purpose of acquiring an interest in McPherson's.
All of the shares in Gallin are owned by Bennamon Pty Ltd, which is wholly owned by Kin Group, which is ultimately controlled by the Geminder family. Kin Group also owns a significant stake in Pact Group Holdings Ltd (ASX: PGH), among many other investments.
Gallin has been quietly building up a position in McPherson's over the last few months and, prior to today, owned a 4.95% stake.
"McPherson's has lost its way"
Gallin's Director, Nick Perkins, believes McPherson's has lost its way and needs new leadership.
He said, "McPherson's is a business that has lost its way and is in urgent need of reinvigoration across its strategy, governance, and leadership. The company's performance has disappointed shareholders for some time despite owning a number of quality, attractive brands across key consumer markets."
"Now investors face a further extended period of uncertainty, including a lack of visibility on the current performance of sales of the Dr. LeWinn's product range into China. Although highly uncertain and with no guarantee of success, McPherson's urgently needs to undertake a full operational and strategic review with a view of turning around the business. We have the capital, capability, wherewithal and patience to do this, while shareholders have an opportunity to receive cash now at an attractive premium."
Gallin also took aim at management's poor M&A track record, its history of one-off adjustments, and wasted capital.
It concluded: "McPherson's also has a relatively poor M&A track record and a history of recognising "one-off" adjustments. Notably, between FY16 and 1H FY21 there has been c. $56.7 million4 in one-off impairments, inventory write-downs and restructuring costs. Moreover, the latest downgrade to the outlook on 1 December 2020 has further eroded market trust having come approximately 1 month after McPherson's raised fresh capital from shareholders."
