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What price should Adore Beauty accept? |
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That’s the question facing the online retailer’s board after it knocked back a $1.30 per share takeover approach from UK e-commerce group THG last week. Lucky for us, Citi retail analysts Adrian Lemme and James Wang have come up with some numbers to test out. |
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In a note to clients, the pair reckon Adore could fetch up to $1.86 per share – a 62 per cent premium to its last close but a far cry from its $6.75 per cent float price just three years ago. Lemme and Wang have based this bid price on Adore’s FY27 EBITDA margin target of 8 per cent to 10 per cent saying: |
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“If an 8 per cent EBITDA margin was achieved on FY24-estimated sales, Adore Beauty could report around $15 million in EBITDA. Applying the median peer FY24e EV/EBITDA multiple [9.5 times] would imply a fair value bid of $1.86 per share…” |
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However, Lemme and Wang are somewhat sceptical Adore can hit this target, noting that other online retailers in fashion and footwear have only been able to achieve EBITDA margins above 8 per cent during the height of the pandemic shop-a-thon. So, they put an acceptable offer somewhere between $1.30 and $1.86. |
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No other bids have come out of the woodwork yet but sources tell Street Talk it would be a decent buy for Wesfarmers’ health and wellbeing division, now the Silk Laser acquisition has closed. There’s also a tie-in with Adore chief Tamalin Morton, who used to run the Priceline pharmacy unit at Australian Pharmaceutical Industries before it was snapped up by Wesfarmers. |
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Offshore mid-market private equity houses like BondiBoost-owner Gauge Capital or London-based beauty sector specialist Manzanita Capital could also take a look. |
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No doubt, defence adviser UBS will be taking heart from a revival in local beauty and fashion deals. |
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A sale would end a difficult period for Quadrant Private Equity, which brought the beauty retailer to the ASX in 2020 and has watched its shares decline 83 per cent. Others deciding its fate are co-founders Kate Morris and James Height, New York hedge fund Woodson Capital Management and small-cap specialist Spheria Asset Management. |
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| Emma Rapaport Co-editor, Street Talk |
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Mexican industrial real estate trust Fibra Next is delaying its highly anticipated IPO until next year, Bloombergreports.777 Partner‘s takeover of Everton FC is facing increased scrutiny from Premier League officials, Bloombergreports.Experts are warning that increased red tape on mergers would make Australia less competitive for early-stage capital, Ronald Mizen writes.Origin Energy shareholders are expected to reject Brookfield’s proposed $20 billion buyout, writes Joshua Peach. |
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Quadrant tried to offload Superior Food in 2021 after the competition regulator approved Woolworths′ entry into the sector via PFD Food Services. Woolworths took a chunk of PFD at about 11 times its pre-COVID-19 earnings. |
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