Pacific Smiles considers ‘opportunistic’ $223.4m takeover bid from Genesis Capital

Shares in Pacific Smiles rocket 20 per cent as the dental company considers a takeover proposal from a private equity group.

Pacific Smiles is the subject of a takeover bid from Genesis Capital.

Dental group Pacific Smiles shares have rallied following private equity group Genesis Capital’s “opportunistic” $223.4m takeover following a raid on its share registry.

The board of Pacific Smiles said it will consider whether the $1.40 per share bid from the healthcare-focused private equity group is in the best interest of shareholders, despite calling the offer “opportunistically timed”.

The $223.4m unsolicited, non-binding proposal from Genesis Capital was received on December 16, Pacific Smiles told investors on Monday. Genesis Capital is also considering options to allow Pacific Smiles shareholders the opportunity to roll their shares into unlisted equity.

The private equity group already controls 29.9 million Pacific Smiles share, or 18.75 per cent of the issued capital, which sources said were acquired from institutional shareholders in recent days.

Shares in Pacific Smiles were up 18 per cent to $1.41 around lunchtime on Monday, helping to reduce total losses for the year-to-date to 9 per cent, compared to a 7.2 per cent gain for the All Ordinaries.

The $1.40 per share offer is a 28 per cent premium to the five-day volume-weighted average price and 43 per cent to the one-month VWAP. The most recent price targets on Pacific Smiles was 88c by Wilsons and $1.05 from RBC Capital Markets.

Pacific Smiles said that the proposal is subject to several conditions including satisfactory diligence, access to Pacific Smiles’ senior management team and negotiation of relevant transaction documents.

“The Board will act in what it considers to be the best interests of Pacific Smiles and its shareholders as a whole, including assessing the merits of the Indicative Proposal relative to continuing to capitalise on our existing network, brand and current trading momentum, and further leveraging our organic growth capability and strong balance sheet position,” the company said in a statement.

RBC Capital Markets analyst Craig Wong-Pan said the offer from Genesis Capital looked to be reasonable with Pacific Smiles unlikely to recover to pre-Covid levels because earnings will be structurally lower due to changes in dental practitioner work hours and higher costs.

“While Genesis Capital’s proposal looks to be opportunistically timed because it follows a weak trading update by Pacific Smiles and the company yet to appoint a permanent CEO, we consider their proposal to be a reasonable offer,” he said.

“We do not expect Pacific Smilies’ valuation multiple to recover all the way to pre-COVID levels because we believe earnings will be structurally lower due to changes in dental practitioner work hours, patient cancellation rates remaining elevated and higher costs per dental centre.

Genesis Capital was founded in 2017 by former Crescent Capital and Bain Capital executives Dr Michael Caristo and Christopher Yoo and is chaired by David Gordon. The equity group has amassed a variety of businesses in the past few years including General Homecare, SmartClinics and Impression Dental Group.

Since the establishment in 2021, Impression Dental has acquired 27 dental clinics and would compliment 120 dental centres under the Pacific Smiles brand.

Pacific Smiles came under pressure from its founder Alex Abrahams late last year, who called for a board spill of the group as he accused the board of having focused too much on expansion at the expense of profitability.

Pacific Smiles has appointed Greenhill & Co as financial adviser and Gilbert + Tobin as legal adviser. Genesis is being advised by Jarden and Clifford Chance.

Originally published as Pacific Smiles considers ‘opportunistic’ $223.4m takeover bid from Genesis Capital