)
The takeover saga for dental practice operator Pacific Smiles looks all but over after the company’s board today recommended shareholders accept the $311 million cash bid backed by Genesis Capital which already controls about a third of the shares on issue.
Beam Dental Bidco, the takeover vehicle controlled by Genesis Capital founders Dr Michael Caristo and Chris Yoo, is poised to secure full control of the Sydney-based dental group with an unconditional off-market bid of $1.95 per Pacific Smiles share.
Just two days after the Pacific Smiles annual general meeting where the board affirmed its rejection of the Genesis bid, the company today has bowed to the reality of its untenable position to inform shareholders that they should now accept the offer.
The successful bid comes on the heels of Beam Dental using its blocking stake in the company to vote down a $327 million offer, at $2.05 per share, from rival bidder National Dental Care in August.
The Pacific Smiles board’s decision to throw in the towel today follows a year-long battle from both Genesis and National Dental Care for control of the group.
The board today notes that Beam Dental Bidco has control of 32.93 per cent of Pacific Smiles shares and that “multiple shareholders” that own a combined 12 per cent of the company’s shares have indicated they either support the Genesis-backed offer or plan to accept the offer as it stands.
“On this basis, the Pacific Smiles board considers that Genesis Bidco likely has, or will have, sufficient voting power and support to control the outcome of ordinary resolutions (which require 50 per cent of shares voted at the relevant meeting) and therefore now has the ability to obtain effective control of Pacific Smiles,” says the Pacific Smiles board.
“Your board has carefully considered the implications of this development and determined that, in its view, the risks associated with continuing to hold Pacific Smiles shares now outweigh the advantages.
“Accordingly, the Pacific Smiles directors now unanimously recommend, in the absence of a superior proposal emerging, that Pacific Smiles shareholders accept the cash offer.”
Pacific Smiles shares were trading just above $1 each ahead of the original takeover bid from Genesis of $1.40 per share on 18 December 2023.
At the time, Genesis had secured 29.9 million Pacific Smiles shares, or 18.75 per cent of the issued capital.
While Pacific Smiles conceded that the performance of its share price had been “disappointing” prior to the offer, the board initially rejected the bid as opportunistic and that it materially undervalued the company.
However, Genesis has remained in the box seat since then with its blocking stake rising to 19.9 per cent by August. After a series of offers and counteroffers between Genesis and National Dental Care, Genesis was able to vote down the $2.05-per-share offer from the rival bidder at an extraordinary general meeting on 8 August 2024.
In the words of new Pacific Smiles CEO Gary Carrol, in his address to shareholders this week, Genesis is now set to gain control of a company that is exploring “exciting areas of opportunity for us to grow the business and shareholder value”.
“We are a business that is now debt-free and in an attractive net cash position, with strong cash flows that provide significant financial flexibility going forward,” Carrol told shareholders.
“Over the coming period I will be working with the management team and board to finalise a strategy to continue to grow the business in the coming years and I look forward to presenting that strategy to shareholders following the release of the half-yearly accounts.”
In recommending today that shareholders accept the cash offer from Genesis, the Pacific Smiles board has made no recommendation in relation to the scrip offer which will allow shareholders to retain an interest in the company under the control of Genesis capital.
)
