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Why I’m selling my Healthscope Ltd shares

Readers who have been following my articles for a while will know that I mention Healthscope Ltd (ASX: HSO) as an investment idea sometimes.

I liked Healthscope because it provided general exposure to the ageing population of Australia with its private hospitals. It has plans to increase its beds and operating theatres by a good percentage through expansions and new builds, particularly through the new Northern Beaches Hospital in Sydney.

However, today a conditional offer was announced for Healthscope shares at $2.36 per share, which represented a 16% premium to the closing price of $2.03 on Tuesday.

Receiving a takeover offer for a premium is usually a good thing. However, at first I was a little disappointed. Regular ASX investors have lost a few quality healthcare options from the stock exchange due to takeovers such as Pulse Health and the Generation Healthcare REIT.

My initial reaction was hoping that another takeover offer would come in, perhaps from Wesfarmers Ltd (ASX: WES) because it was rumoured to be interested.

But, a wiser investor than me suggested it could be a better move to sell because most of the takeover price is already factored into the current price and the risk of the offer falling through is now higher than the potential for a slightly-higher offer price.

With the cash I would be able to invest in other shares I view as good value.

Healthscope has been fairly disappointing since it listed. It has been investing for growth but the underlying hospital business just isn’t performing well enough, unlike Ramsay Health Care Limited’s (ASX: RHC) Australian division. Who’s to say it will turn around any time soon?

Foolish takeaway

I decided it would be best to sell and move on to other things. If the offer hadn’t been made I probably would have held but there’s now an opportunity to move onto better investments for a decent selling price.

I’m tempted to put my Healthscope money into one of these top shares to grow my portfolio.

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Motley Fool contributor Tristan Harrison owns shares of HEALTHSCPE DEF SET and Ramsay Health Care Limited. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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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