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Vision Eye Institute Ltd share price to soar on takeover bid: What you need to know

The Shanghai-listed Jangho Group has made an all-cash offer for Vision Eye Institute Ltd (ASX: VEI), significantly exceeding the previous bid made by hospital operator Pulse Health Limited (ASX: PHG).

In an announcement after the market’s close on Thursday, Vision Eye, which is Australia’s largest provider of ophthalmic care, said it has received an all-cash off-market offer from the Chinese company valuing it at around $198 million.

Jangho currently owns a 19.99% stake in Vision which it acquired from Primary Health Care Limited (ASX: PRY) in July this year for 94 cents per share. Indeed, the purchase seemed quite strange at the time given that Jangho specialises in construction projects and developments, although it says it has some medical and health exposure.

Jangho will offer $1.10 cash per share for each of the shares it does not already own, which compares to Pulse’s all-scrip bid, valuing Vision Eye at a more modest 88 cents per share. A detailed Independent Expert Report which was commissioned by Vision following Pulse’s bid assessed the control value of Vision shares being in the range of $1.04 per share to $1.18 per share.

Commenting on the bid, Vision Eye said: “The Jangho Offer highlights the strategic value of our business, in particular its day surgery clinics, the program of strategic initiatives being undertaken and Vision’s strong prospects for future growth. Further, Vision has a long history of charitable, philanthropic and educational activities in SE Asia and the proposed partnership with Jangho provides further opportunities to build on and expand these activities.”

Vision Eye intends to recommend that shareholders accept the Jangho offer, subject to there being no superior alternative proposal. At this point, a superior offer appears unlikely given the Independent Expert Report’s determined valuation of the company, as well as the fact that Jangho has built a significant blocking stake in the business.

Vision Eye’s shares are set to soar when they reopen for trade. They closed at 92 cents on Thursday, implying an upside of nearly 20% for the share price. Although investors may be too late to the party, there are still plenty of excellent alternatives currently on offer.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.