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Is Estia Health Ltd a takeover target?

The Estia Health Ltd (ASX: EHE) share price has jumped more than 3% today after the company revealed a potential takeover plot for its business.

Estia Health, an aged care operator, made the announcement shortly after the market had closed on Wednesday. It said that it had become aware that a subsidiary of Sentinel Portfolio Management Pty Ltd, Sentinel Health Trust (“Sentinel”), had indicated its intention to turn its 4.99% stake in Estia into a controlling position with the aid of one of Estia’s fellow aged-care operators.

Essentially, Sentinel would turn its stake into a controlling position, meaning it would hold more than 50% of the company’s stock (giving it control over the business). It would then sell the operating business of 60 (out of 68) of Estia Health’s target sites to that business for $300 million plus the assumption of specific liabilities, although it seems Sentinel would retain ownership of the property for those sites.

It also said it had found a potential buyer for the remaining eight sites. Reportedly valued at $60 million, this sale would involve both the operations and the real property of those sites.

As it stands, Estia Health said it had not been in contact with Sentinel, nor had a proposal of any sort actually been received from the business. It said “the board of EHE advises shareholders to take no action as a result of this information at this time. Further announcements will be made as required.”

The jump in Estia Health’s share price today has given the stock a total rise of 5% over the past month and a little over 25% year-to-date. By comparison, its rivals, Regis Healthcare Ltd (ASX: REG) and Japara Healthcare Ltd (ASX: JHC), are both trading in the red so far in 2017, with Japara down 6.6%.

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Motley Fool contributor Ryan Newman 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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