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Wesfarmers (ASX:WES) share price rises on Silk (ASX:SLA) deal

The Wesfarmers Ltd (ASX: WES) share price went up in early reaction to the acquisition of Silk Laser Australia Ltd (ASX: SLA).

While Wesfarmers is best known for its Bunnings business, it also has started a healthcare division after acquiring Australian Pharmaceutical Industries (API), which is the business that owns Priceline and Clear Skincare Clinics.

Deal agreed

API has entered into a scheme implementation deed with Silk Laser, to buy the whole business for $3.35 cash per share.

This value represents an implied value for Silk of approximately $180 million based on there being 53.76 million shares outstanding.

Silk Laser is allowed to pay a fully franked dividend of up to 10 cents per Silk share, with the takeover offer of $3.35 per share to be reduced by the cash component of any dividends paid.

The Silk board has unanimously recommended that Silk shareholders vote in favour of the scheme and each director intends to vote their shares in favour of the deal, subject to an independent expert concluding the deal is in the best interest of shareholders and in the absence of a superior proposal.

The offer is not subject to due diligence or financing.

A meeting of Silk shareholders is expected to be held in October 2023 and then the takeover would be implemented shortly after.

Why is Wesfarmers buying Silk Laser?

The Wesfarmers Health Managing Director Emily Amos said that the acquisition would complement the division’s existing Clear Skincare Clinics business, “providing scale and efficiency benefits through an expanded presence in the attractive and growing market for aesthetics products and services.” Amos also said:

Wesfarmers Health’s acquisition of Silk would provide Silk franchisees and business owners with the benefits of associated with being part of a broader healthcare, wellness and beauty network and access to capital to support future growth.

The due diligence process highlighted strong operational and cultural alignment between out businesses, and should the scheme be successful we look forward to working with the Silk team and Silk’s franchise partners to support their customers and deliver continued growth.

Final thoughts on this deal for the Wesfarmers share price

It makes a lot of sense for the Wesfarmers Health division, but ultimately it’s a small deal, but it seems like a good use of the company’s cash.

I think Wesfarmers is one of the best businesses around, and I’d be happy to buy shares today for the long-term.

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