1300 Smiles Ltd (ASX:ONT) share price leaps 14% on takeover proposal

It's been a busy day for 1300 Smiles. Let's lift the lid on the latest…

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The 1300 Smiles Limited (ASX: ONT) share price is sparkling in afternoon trade after the company released its FY21 full-year results and announced a takeover proposal.

Tuesday has shaped up to be an eventful day for 1300 Smiles shareholders. After months of sideways trading, the dental facility owner and operator's shares have sprung to life today, up 13.96% to $8.0.

1300 Smiles share price shines on recovery result

Highlights of the full-year results include:

  • Over-the-counter revenue increased 15% to $65.8 million
  • Statutory revenue up 10% on the prior year to $44.9 million
  • Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $15.2 million, up 31%
  • Net profit after tax increased 35% on the prior corresponding period to $9.6 million.
  • Takeover offer received from Abano Healthcare for 84% of 1300Smiles at $8.00 per share cash consideration

What happened in FY21 for 1300 Smiles

The 1300 Smiles share price is ripping ahead this afternoon after reporting a robust performance for FY21. However, it is likely a fair chunk of the price movement is attributable to the proposed majority acquisition by Abano Healthcare.

Firstly, let's cover the dental operator's full-year results. According to the release, the reporting period was one of recovery from the impacts of COVID-19. Despite ongoing disruptions and some restrictions, the company achieved a solid 10% increase in statutory revenue for the year.

As a like-for-like sales comparison, of the 26 dental practices in operation throughout all of FY19 and FY20, sales increased 8% from FY19 to FY21.

Since the end of the financial reporting period, 1300 Smiles has gone on to settle the acquisition of a multi-surgery dental practice in Chinchilla in Queensland. Similarly, another larger practice in Bundaberg is in its acquisition sights — being the company's fourth.

In regards to the acquisition bid for 1300 Smiles, the company has entered into a scheme implementation agreement with Abano Bidco (a member of the Abano Healthcare Group). This agreement entails Abano acquiring 84% of 1300 Smiles.

Furthermore, the conditions stipulate a total cash consideration of $8.00 for non-founder shareholders. Meanwhile, founder shareholders will receive $6.33 per share — 81 cents of which will be contingent on certain conditions.

The company also declared a special fully franked dividend of up to 80 cents per share. According to the release, the board reserves the right to increase this to $1.10 per share.

What did management say?

Commenting on the proposal which may be impacting the 1300 Smiles share price, managing director Daryl Holmes said:

1300 Smiles is a company we have built from the ground up over many years. Abano Healthcare is a highly complementary partner for our business with a strong Australian footprint of 106 practices, largely via the Maven brand, to which 1300 Smiles high-quality portfolio of 33 practices will be added.

The future for 1300 Smiles is bright and as part of the Abano Healthcare group is well-positioned to continue the proud legacy of high-quality dental care we have provided to Australian communities for over 30 years.

Additionally, regarding the company's FY21 result, Mr Holmes said:

This year, the business has continued to manage the challenges facing all of us from COVID-19. The business has been resilient with its staff and dentists needing to manage short-term movement restrictions and the disruptions that this provides for availability, patient bookings and the need for re-bookings.

What's next for 1300 Smiles?

Unfortunately for shareholders, no guidance was provided with today's results. This might be due to the company intending on being acquired by a private company.

1300Smiles investors can expect to receive a scheme booklet relating to the proposed acquisition. Upon receipt, shareholders will have the opportunity to vote on the scheme. If approved, the scheme will be implemented shortly thereafter.

Finally, any acquisition remains subject to court and foreign investment approvals.

1300 Smiles share price snapshot

Prior to today's move, the performance of the 1300 Smiles share price had been underwhelming. Before today, the company's shares had delivered a disappointing 8% return in the past 12 months.

While an 8% return in a year may not seem too bad, the S&P/ASX 200 Index (ASX: XJO) has returned 22% in the same period.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 1300SMILES Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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