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Healthscope Ltd shares storm higher on takeover news

child in a superman outfit indicating a surge in share price
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One of the best performers in early trade on Thursday has been the Healthscope Ltd (ASX: HSO) share price.

At the time of writing the private hospital operator’s shares are up a sizeable 16% to $2.35.

Why are Healthscope’s shares storming higher?

This morning Healthscope confirmed that it has received an unsolicited proposal to acquire all Healthscope shares by way of a scheme of arrangement from a consortium of investors.

According to the release, the preliminary, non-binding proposal has an indicative offer price of $2.36 cash per share. This represents a premium of 16% to the closing share price of $2.03 on April 24.

The consortium comprises the constituent entities of BGH Capital, AustralianSuper, Carob Investment Private Limited, Ontario Teachers’ Pension Plan Board, and Canada Pension Plan Investment Board.

One member of the consortium, AustralianSuper, already has a holding of approximately 14% in Healthscope.

The proposal is subject to a significant number of conditions including due diligence and the arrangement of debt financing for the acquisition. As such, management has advised shareholders to take no action in relation to the proposal and warned that there is no certainty that it will result in a transaction.

What now?

I think this offer is opportunistic and that most shareholders would be a little disappointed with it. After all, just over a year ago Healthscope’s shares were trading above the offer price.

Many long-term shareholders may now be hoping that Wesfarmers Ltd (ASX: WES), which is rumoured to have been interested in acquiring Healthscope, comes in with a superior offer and creates a bidding war.

But considering the weak trading conditions and Healthscope’s poor financial results of late, this may be wishful thinking.

I would suggest investors stay clear of Healthscope and focus on quality healthcare shares such as Cochlear Limited (ASX: COH) and ResMed Inc. (ASX: RMD).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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 Scott Phillips.

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