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Why Pulse Health Limited shares are surging on takeover talk

Team of happy healthcare workers talking on a meeting.

Shareholders of private hospital operator Pulse Health Limited (ASX: PHG) will no doubt be smiling today after its share price jumped a whopping 22% on takeover speculation.

Speculation started on Friday after a report in the Australian Financial Review stated that Ben Thynne and Andrew Savage from fellow private hospital operator Evolution Healthcare had increased their holding in the company to around 11%.

Whilst management responded this morning by acknowledging that this report is in fact correct, it was the second piece of information that no doubt sent the share price hurtling skywards. Pulse Health advised that it has recently received confidential, highly conditional, indicative proposals and expressions of interest from other parties relating to the acquisition of the company.

It went on to explain that the board has not pursued these confidential proposals and expressions of interest further on the basis of their conditionality, lack of certainty, and because they feel they fundamentally undervalued Pulse Health.

No further details of the proposal were released by the company, but it has advised in the event of further discussions it has retained Allier Capital to act as financial adviser and Norton Rose Fulbright as its legal adviser.

Despite the fact management has warned shareholders to take no action in response to the media speculation, the market is clearly having other ideas and appears to be anticipating a bidding war for the private hospital operator.

As tempting as it may be, I would caution against making a speculative investment in Pulse Health today. Those looking for exposure to the healthcare industry might be better served with investments in Ramsay Health Care Limited (ASX: RHC) or Healthscope Ltd (ASX: HSO) instead.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

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