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The cat-and-mouse game for control of dental clinic operator Pacific Smiles Group (ASX: PSQ) may be drawing to a close after Genesis Capital founders Dr Michael Caristo and Chris Yoo made what appears to be their final offer - an increased unconditional bid that values the company at $311 million.
However, the higher offer, made via Genesis vehicle Beam Dental Bidco, is still short of the $327 million rejected by Caristo and Yoo from rival bidder National Dental Care only three months ago when the major investors used their 19.9 per cent shareholding in Pacific Smiles to thwart the higher bid at a meeting of shareholders on 17 September.
Beam Dental Bidco has lifted its all-cash consideration for Pacific Smiles shares from $1.90 to $1.9825 per share – a figure that includes the 3.25c dividend declared by Pacific Smiles and already paid on 10 October 2024.
Effectively, the suitor is aiming to buy the company for an increased cash offer of $1.95 per share with the offer open until 29 November 2024.
Shareholders can still opt for a mix of cash and shares in the new Pacific Smiles entity, with the cash component lifted from 47.5c to 48.5c per share.
The revised offer has been declared by the Genesis duo as their “best and final offer price” and that it will not be lifted in the absence of an alternative offer.
“Bidco believes it is unlikely that an alternative control proposal will emerge given there is no pathway to compulsory acquisition without the cooperation of Bidco and its associates who currently hold 19.9 per cent of Pacific Smiles shares,” says Beam Dental Bidco in its bidder’s statement.
This firmly cements Beam’s position as a spoiler for any future takeover play on the company.
In making their case via the bidder’s statement, Beam points to a number of shortcomings for the current business including that Pacific Smiles has failed to offer profit guidance for FY25 and that it has failed to deliver “clinic EBITDA growth over the past two halves”.
Beam also notes that Pacific Smiles has experienced “significant board and management instability, having had four CEOs and two chairs in the last 14 months”.
Last month, Pacific Smiles appointed former G8 Education (ASX: GEM) managing director Gary Carroll as its new CEO, replacing Andrew Vidler who resigned from the position less than eight months into the role.
Pacific Smiles posted a net profit of $8.04 million in FY24, up 232 per cent from the previous year, as revenue rose 8.7 per cent to $179.75 million. Underlying EBITDA rose 16.9 per cent to $28.2 million, which the company says had reflected higher patient fees and improved operational efficiency.
“The Pacific Smiles board is carefully considering these developments and will provide its formal response, which will include any update to the board’s recommendation that shareholders reject the offer, by way of a supplementary target’s statement in due course,” says Pacific Smiles in response to the increase offer from the Genesis team.
“The board will take into account feedback from shareholders as part of its assessment of the revised offer, and maintains its position that it will only recommend a transaction that is in the best interest of shareholders as a whole.”
The Pacific Smiles board has advised shareholders to take no action in relation to the revised offer.
Shares in pacific Smiles closed 3 per cent higher at $1.945.
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