Wesfarmers share price on watch amid $169m Silk Laser takeover offer

Wesfarmers is going shopping at the beauty side of the market.

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Key points

  • Wesfarmers recently sold down its stake in Coles
  • These funds are now being put to use with the potential acquisition of Silk Laser
  • Wesfarmers has tabled an offer valuing the clinic operator at $169 million

The Wesfarmers Ltd (ASX: WES) share price will be one to watch closely on Thursday.

Why is the Wesfarmers share price on watch?

The Wesfarmers share price will be on watch on Thursday after the company identified its next takeover target.

Just a matter of days after selling down its stake in Coles Group Ltd (ASX: COL), the company is ready to put the funds to work to acquire Australia's largest specialist clinic networks, Silk Laser Australia Ltd (ASX: SLA).

According to the release, Wesfarmers Health has tabled a non-binding offer of $3.15 cash per share. This represents a 30% premium to its last close price and values Silk Laser's equity at $169 million. It is, however, worth noting that the offer is below the Silk IPO price of $3.45 per share.

The indicative proposal also provides for the payment of a fully franked dividend of up to a maximum of 10 cents per share. However, the cash component of any such dividend will reduce the cash consideration accordingly.

Wesfarmers notes that Silk is one of the largest non-surgical aesthetics clinic operators in Australia and New Zealand with a network of over 140 clinics. If the takeover is successful, it will become part of the Wesfarmers Health division. Management expect it to complement the division's existing presence in the sector through its ownership and operation of Clear Skincare Clinics.

What's next?

The release notes that Silk Laser has granted Wesfarmers up to 30 business days to undertake exclusive due diligence, with potential to extend the exclusivity period for a further 10 business days in certain circumstances.

As things stand, the Silk board of directors intends to unanimously recommend to its shareholders that they vote in favour of the scheme of arrangement. Each director intends to vote any shares they control in favour of the scheme.

Both are subject to the parties agreeing a scheme implementation deed on terms no less favourable than in the indicative proposal, the independent expert's report, and there being no superior proposal.

One of the company's largest shareholders, WAM Capital Limited (ASX: WAM), which owns 9.3% of Silk's outstanding shares, has confirmed its support for the indicative proposal. So much so, it has entered into a voting agreement which is subject to there being no superior proposal and the independent expert's report.

Silk Founder and Managing Director, Martin Perelman, was "pleased" with the news and believes "it is in the best interests of shareholders to engage" with Wesfarmers.

Motley Fool contributor James Mickleboro 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 positions in and has recommended Coles Group and Wesfarmers. The Motley Fool Australia has recommended Silk Laser Australia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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