The Hong Kong-listed EC Healthcare’s $178m bid for Silk Laser Clinics sees the return of Chinese investors to the Australian healthcare space.
EC Healthcare is an unknown in the Australian market and its emergence as a bidder for Silk Laser Clinics has caught many in the market by surprise.
But it is thought to have quietly held talks with Silk Laser before Wesfarmers lobbed its offer for the business in April.
The company is Hong Kong’s largest non-hospital medical service provider, offering health, wellness and beauty treatments in about 80 clinics throughout China and Hong Kong, and its focus on Silk Laser Clinics is part of a plan to expand throughout the Asia Pacific.
Founder and chief Eddy Tang owns about 60 per cent of the Hong Kong-listed business.
Given that the company’s market value is only about $1bn, it is unlikely to pursue Silk’s far larger rival, Laser Clinics Australia, which was purchased by Kohlberg Kravis Roberts in 2017 for $650m.
Chinese companies turned up to pay bullish prices for Australian companies some time back, such as Vision Eye Institute, GenesisCare and vitamins and supplements business Swisse.
But they retreated from the Australian market due to cooling Australia-China government relations.
The only deal of late to have involved a Chinese buyer in the healthcare space has been George Clinical.
Hillhouse Capital agreed to acquire the $200m-odd company only to have to recut the transaction to secure approval from the Australian Foreign Investment Review Board because the chronic disease research firm holds sensitive data.
Silk Laser Clinics is not expected to face the same objection from FIRB.
EC Healthcare’s $3.35 per share offer was made known on Tuesday, and with the share price closing at $3.37, the market is betting a bidding war with Wesfarmers will emerge.
Its offer is a 6.3 per cent premium to the $3.15 per share ($167m) made in April by Wesfarmers, which was subject to exclusive due diligence and recommended by the target’s board.
The latest offer, which the board describes as superior, is a 38 per cent premium to Silk’s closing price of $2.42 on April 19.
Wesfarmers, which owns Target, Kmart and Officeworks, has been building its own healthcare unit, starting with the acquisition of Priceline pharmacy chain owner API for $763m in March last year, so it will be interesting to see how critical the conglomerate sees Silk for its stable.
The offer was through its subsidiary API.
Wilson Asset Management had agreed to vote its 9.3 per cent holding in favour of the Silk proposal and Wesfarmers at the time was granted 30 days of due diligence.
Silk is working with Highbury Partnership and Wilson Corporate Finance and Kain Lawyers.
Silk listed in 2020 with a market value of $162.5m.
But like all beauty treatment operations, had been hard hit by the pandemic.
It is one of Australia’s largest specialist clinic networks, with 53 clinics across Australia offering a range of non‑surgical aesthetic products and services.
Its core offerings are laser hair removal, cosmetic injectables, skincare services, body contouring and fat reduction services, and owned brand skincare products.
It was co‑founded by its current chief executive, Martin Perelman, in 2009 in Adelaide.
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