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Why Lifehealthcare Group Ltd shares jumped 41% higher today

High

In morning trade the Lifehealthcare Group Ltd (ASX: LHC) share price has defied the market sell-off and stormed higher.

At the time of writing the healthcare solutions provider’s shares are up 41% to $3.63.

Why are its shares higher?

As I explained yesterday, LifeHealthcare’s shares have been in a trading halt pending an announcement regarding a takeover approach.

This morning the company has confirmed that it has entered into a binding scheme implementation deed with Pacific Equity Partners after receiving a takeover offer of $3.75 per share in cash. This equates to a premium of almost 46% from the last close price and values the company at $179 million.

LifeHealthcare’s directors have unanimously recommended that shareholders vote in favour of the scheme, in the absence of a superior proposal and subject to an independent expert concluding that it is in the best interests of shareholders.

What about the dividend?

LifeHealthcare has been one of my favourite shares in the healthcare sector over the last 12 months due to its solid growth prospects and generous dividend.

The good news for existing shareholders is that the company is still able to declare an interim dividend when it announces its results on February 20. However, the takeover price will be reduced accordingly.

In addition to this, management has advised that it intends to declare a fully franked special dividend of 18 cents per share if the scheme goes ahead. Once again, this would reduce the takeover price.

What now?

I think this is a good deal and if I were a shareholder I would vote in favour of it. Investors that aren’t bothered about the dividends might want to consider selling today and reinvesting the funds elsewhere. Especially with a number of healthcare shares sinking lower this week amid the market sell off.

I would consider buying Nanosonics Ltd (ASX: NAN), National Veterinary Care Ltd (ASX: NVL), or Zenitas Healthcare Ltd (ASX: ZNT).

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As of 2.11.2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. The Motley Fool Australia has recommended Zenitas Healthcare Ltd. 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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