Corporate Action: We Recommend Participating in Ansell’s Raise Subject to Individual’s Goals

Ansell is acquiring Kimberly-Clark’s Personal Protective Equipment business, or KCPPE, for USD 640 million. We think Ansell is paying a good price and is getting the business for less than we think it’s worth. We increase our fair value estimate by 7% to AUD 32 as we assume stronger returns on new capital that Ansell invests in the future. We think this is appropriate given that KCPPE is a higher-margin business and is significantly less capital-intensive. While we think Ansell is getting a good price, the accompanying dilutive equity raise at AUD 22.45 per share partially offsets the benefit to fair value. Assuming the raise is fully subscribed, it adds 21 million shares, a 17% expansion of the share count.