Wesfarmers share price drops as Silk takeover competition heats up

There's a new challenger for the aesthetics clinic operator.

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a woman lies on a medical bed for a cosmetic lasering session with a hand held laser directing light onto her cheek area.

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Key points

  • The Wesfarmers share price is lower today amid another company entering the race to acquire Silk Laser Australia  
  • Hong Kong-based EC Healthcare has launched a bid for the laser aesthetics company
  • The EC Healthcare offer represents a 6.3% premium on Wesfarmers' proposal

The Wesfarmers Ltd (ASX: WES) share price is down 0.9% as the diversified business faces competition to buy the Silk Laser Australia Ltd (ASX: SLA) business.

Readers may remember that just over a month ago, Wesfarmers announced it was in the process of buying Silk Laser Australia, one of the largest non-surgical aesthetics clinic operators in Australia and New Zealand with a network of more than 140 clinics.

But it seems it's not a done deal for Wesfarmers.

Competing bid for Silk Laser Australia shares

Silk Laser Australia announced this morning it has received a competing, non-binding, and indicative proposal from EC Healthcare, which claims to be Hong Kong's largest non-hospital medical service provider.

The bid from EC Healthcare is $3.35 cash per share, which is a 6.3% premium to the offer from Wesfarmers' Australian Pharmaceutical Industries (API).

The proposal from EC allows Silk to pay a fully franked dividend of up to 10 cents per share, which would reduce the cash consideration offered.

There are a number of conditions attached to the bid including completing confirmatory due diligence, unanimous recommendation from the Silk board, entry into a scheme implementation agreement, and all necessary regulatory approvals being obtained.

Which offer will be accepted?

Silk Australia said that after careful consideration and receiving advice from both its financial and legal advisers, the Silk board decided the EC proposal is the stronger offer. Indeed, this could be influencing the Wesfarmers share price today.

The ASX healthcare share has told Wesfarmers it has until 30 May 2023 to provide a proposal response. The Silk Laser Australia board will then decide which offer is the strongest.

Silk Laser Australia's board said shareholders don't need to take any action at this time. It will provide relevant updates to shareholders about any further offers from API.

It also noted there is no certainty the engagement between either Silk or EC Healthcare will result in a change of control transaction of an offer capable of acceptance by Silk shareholders.

What does this mean for the Wesfarmers share price?

The Silk Laser Australia business has a market capitalisation of around $160 million, whereas Wesfarmers has a market capitalisation of $58 billion. As such, it's a relatively small deal for Wesfarmers, whether it goes ahead or not.

If it's successful, it will bolster Wesfarmers' healthcare division and deliver it more earnings. We'll have to see what happens next in the fight for Silk.

Motley Fool contributor Tristan Harrison 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 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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