The SILK Laser Australia Ltd (ASX: SLA) share price won't be going anywhere today.
The provider of non-surgical cosmetic treatments entered a trading halt prior to the market open. Since then, the company has unveiled an acquisition and associated capital raising.
At the time of writing, SILK Laser shares are stuck at $4.53.
Why is the SILK Laser share price frozen?
According to the release, the company has entered a binding agreement to acquire 100% of Beauty Services Holdings Pty Ltd, LMD2 Pty Ltd, and their associated entities. Together these entities, known as ASC Group, operate Australian Skin Clinics in Australia and The Cosmetic Clinic in New Zealand.
SILK has agreed to pay $47 million in upfront cash on a debt-free basis for the acquisition. Up to an additional $5 million in earn-out payments will be provided dependent on the opening of certain new clinics.
ASC Group adds 56 clinics, taking SILK to 117 clinics under its banner. The clinics are comprised of 35 traditional franchise clinics, 4 corporate, and 3 joint venture clinics across five Australian states.
Furthermore, 14 of the acquired clinics operate in New Zealand trading as The Cosmetic Clinic. Both Victoria and New Zealand will be new geographic entries for SILK.
Commenting on the acquisition, SILK CEO and co-founder Martin Perelman said:
The ASC Group acquisition is an exciting opportunity for SILK and delivers on our growth strategy. ASC Group is well aligned to our existing service offering and complements our existing network, whilst providing scaled entry into Victorian and New Zealand markets.
SILK Laser noted that it expects network cash sales in the first full year of ownership to be $80 million, up from $72 million in FY20.
The acquisition solidifies the Australian cosmetic company as the second largest non-surgical cosmetic provider in the country.
How's it being paid for?
Of the $47 million upfront payment, $22.5 million will be covered by a new debt facility. Another $7.5 million will come straight out of the company's piggybank.
The remaining $20 million will be funded via a fully underwritten institutional placement at $4.30 a share.
Additionally, the earn-out portion of the acquisition will be payable in SILK Laser shares, issued at a price of $4.38.
What's next?
Based on the announcement, the acquisition is not subject to any approvals. The ACCC has confirmed it does not intend to review the proposed transaction.
If all goes to plan, SILK Laser will complete its acquisition of ASC Group by the end of August this year.
Lastly, the company reconfirmed its upgraded FY21 forecasts following strong momentum.
