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Gateway Lifestyle Group (ASX:GTY) receives takeover proposal at a 15% premium

Gateway Lifestyle Group (ASX: GTY) has just received an all-cash proposal for all of its shares from Hometown Australia Holdings Pty Ltd and Hometown American Communities Limited Partnership of $2.10 per share.

Gateway is one of Australia’s largest retirement village operators. Hometown America was founded in 1997 and operates over 60 residential land lease communities across 11 states in the US. It acquired its first Australian community in March 2017.

The proposal is subject to a number of conditions including due diligence, Foreign Investment Review Board (FIRB) approval and entering into a scheme implementation agreement.

The Gateway Board has commenced a detailed assessment of the proposal, although it hasn’t agreed to provide due diligence access yet. Hometown has requested a four week exclusivity period for due diligence. The Board has appointed Fort Street advisers as the financial adviser and Herbert Smith Freehills as the legal adviser.

Hometown said that it has entered into pre-bid agreements with four securityholders under which it has acquired a relevant interest in over 17.5% of Gateway’s shares.

The offer is around a 15% premium to yesterday’s closing price of $1.83. However, Gateway was trading above $2.10 in November and December last year and was trading above $2.70 in 2015.

If I were a shareholder I would be hoping for more than $2.10 for my shares. Gateway has a promising long-term future considering the ageing demographics of Australia and I’m not sure that $2.10 fully reflects that potential.

Foolish takeaway

This may just be the opening bid for Gateway, but nothing is certain. I was hoping to invest in Gateway in time due to the ageing tailwind but worries about the rising interest rates put me off.

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Motley Fool contributor Tristan Harrison has no position in any of the 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 Scott Phillips.

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