The Ansell Ltd (ASX: ANN) share price has risen 7% after returning to trade after its takeover announcement.
Ansell is a world leader in providing safety equipment in industrial and healthcare settings. It is best known for its protective gloves.
Kimberly-Clark acquisition
Ansell is buying Kimberly-Clark‘s personal protective equipment (KCPPE) business for US$640 million in cash.
KCPPE designs and sells hand, body and eye protection products under the Kimtech and KleenGuard brands to customers in global scientific (including life sciences) and industrial segments.
What’s Ansell hoping from this deal? It wants to accelerate the company’s growth strategy, “enhancing its global position in attractive and growing segments, including scientific where Ansell’s differentiation is highly valued”.
The ASX share also hopes it will generate economies of scale with a focus on the combined supply chain and organisational efficiency.
Ansell is expecting annual run-rate net cost synergies of around US$10 million per year, achieved in the third full-year of ownership. It also referred to around US$50 million of net present value (NPV) of tax benefits coming from the amortisation of US goodwill.
The company said that after adjusting for the synergies and tax benefits, it’s getting KCPPE for a ratio of 7.8x the EBIT (EBIT explained) compared to the enterprise value.
Funding progressed
The company announced today that it completed a A$400 million (US$263 million) fully underwritten institutional placement (capital raising) after issuing 17.8 million new Ansell shares to institutional investors at a price of A$22.45.
It received “strong interest” in the capital raising from existing and new institutional investors.
Ansell will now offer eligible regular shareholders the opportunity to apply up to $30,000 of new shares and it’s looking to raise up to A$65 million. This share purchase plan (SPP) will be priced at the lower of the placement price ($22.45) or a 2% discount to the five-day average price of Ansell shares up to the closing date of the SPP.
FY24 outlook
The company gave unchanged guidance for its FY24 adjusted profit/earnings per share (EPS) of between US$0.94 to US$1.10, excluding the impact of the acquisition and transaction funding.
The placement is expected to reduce FY24 adjusted EPS by US$0.01 to US$0.02 which includes the effects of new Ansell shares issued and interest income on cash proceeds prior to the acquisition being completed.
Ansell is expecting the acquisition to occur during the first quarter of FY25.
Final thoughts on the Ansell share price
Investors seem to be a big fan of the acquisition with how far Ansell shares have risen today.
The takeover seems compelling, but I’m not sure what is a good price is for Ansell in light of its corporate action. If it can grow earnings from here, Ansell shares could be a good investment, though there are other ASX dividend shares that could be a better buy in my opinion, with a bigger yield.
