BWX Limited (ASX: BWX) shareholders have been patiently waiting for an answer about the potential takeover offer received almost four months ago for the natural beauty business.
John Humble, Aaron Findlay and Bain Capital Private Equity made a preliminary, non-binding, indicative and conditional proposal to acquire all the BWX shares at $6.60 per share.
A price of $6.60 suggests a 61% upside to the current pre-open price of $4.09. BWX confirmed a few weeks ago that the Bain Consortium had substantially completed due diligence but requires until mid-September to complete their work.
This means if the offer goes ahead it could be announced in less than a week from now. The market doesn't seem to think it's likely to go ahead. Indeed, there is no guarantee it will go ahead.
However, with the current price now well below the pre-takeover announcement offer price I think BWX could offer investors value even if the offer doesn't go ahead.
Despite all the negativity surrounding BWX's acquisition strategy and other aspects of operation over the last year, underlying earnings per share (EPS) grew by 15% – this excludes acquisition expenses.
BWX has a portfolio of natural beauty products, the natural beauty market is growing even faster than the 'normal' beauty market. Sukin is still growing and management has plans to sell it across the USA and it just started selling in Wesfarmers Ltd's (ASX: WES) Coles. The US brands it recently acquired can be sold in all of its other markets like Canada, the UK and Australia.
Indeed, Nourished Life, Mineral Fusion and Andalou Naturals could all deliver good growth momentum in the first half of FY19 with the cross-market selling opportunities. However, it's early days and there could be integration risks if management are spread across too many different brands and different countries.
Foolish takeaway
BWX is trading at 19x FY18's underlying EPS with a grossed-up dividend yield of 2.6%. Even if the offer doesn't come through I think BWX offers decent market-beating potential at the current price as long as its acquisitions perform well over the next year and beyond. Plus, the potential 60% upside in a week or so could be a very quick return if it goes ahead.
