Selling is not an issue here since Wes already has a ~10% stake in the company. IMO, Wes is calling EC's bluff, if they walk away, Wes $3.15 will be a sole bidder. Hence Wes unwilling to match and allow EC to access private DD. But say EC decides to stick to its proposal, I don't see why Wes can't up the bid to $3.50 (12% increase - just like when it upped its bid for API from $1.38 to $1.55). I mean, EC does look like a credible buyer to some extent -> founder CEO with some amount of financial powder on b/s. But again, what synergies are to be had for EC? Wholly HK business, maybe some franchise and data expertise but those aren't exactly easily realizable tangible synergies.
But in any case, think the r/r is great here. At most your money is kinda stuck for awhile but that's about it.
A way to think about a credible valuation range is via past transactions. We have KKR's acquistion of LCA and API's acq of clearskinclinic. LCA went for 13x EBITDA and CSC went for ~8-9x EBITDA. Difference = LCA has franchise arm whilst CSC doesn't. Even if KKR overpaid by argument (which seems to be the case given recent headlines), can easily triangulate higher stock price at 10x EBITDA, not accounting for easy cost synergies.
Just my 2c
SLA Price at posting:
$3.12 Sentiment: Buy Disclosure: Held
