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November 21, 2022
dentalcorp Holdings Ltd. Announces commencement of strategic review process
TSX: DNTL | CAD 6.07 | Outperform | Price Target CAD 15.00
Sentiment: Positive Our view: DNTL announced the commencement of a strategic review process to unlock shareholder value. The company has received unsolicited expressions of interest. The company's board has formed a special committee of non-executive, independent directors in consultation with its financial and legal advisors to undertake a review and evaluation of strategic alternatives to the company to unlock shareholder value. The CEO noted "management team is fully aligned with the Board's decision to explore options to maximize shareholder value, including in response to unsolicited expressions of interest that have been received." dentalcorp does not currently intend to provide any updates with respect to this process unless and until its BoD approves a specific transaction or otherwise concludes its review of strategic alternatives. In our view, the decision to conduct a strategic review process is likely due to the significant decline of the stock (-63% ytd) and de-rating of the stock vs. peers.
Valuations: The stock is currently trading at 8.5x 2023E IFRS EBITDA and 8.9x 2023E GAAP adj. EBITDA. Relative to US & Canadian peers (on a US GAAP and IFRS basis), dentalcorp appears to trade at the lower end of the range of peers.
Shareholders: We note that L Catterton (39.7% of outstanding shares; 27.5% voting rights) and Graham Rosenberg, CEO (5.3% of outstanding shares; 34.6% voting rights) together hold 45.00% of outstanding shares and 62.10% of the voting rights.
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