The market may be struggling to push higher today, but that certainly hasn’t been the case for the Navitas Limited (ASX: NVT) share price.
At lunch the education services provider’s shares are up a massive 21% to $5.27.
Why is the Navitas share price on fire today?
This morning Navitas revealed that it has received an unsolicited, preliminary, conditional, and non-binding proposal from a consortium which includes BGH Capital, AustralianSuper, and Mr Rodney Jones.
The BGH Consortium has offered to acquire 100% of the outstanding shares in Navitas for $5.50 cash per share by way of a scheme of arrangement.
This represents a 26% premium to the last close price, a 25% premium to the 3-month volume weighted average price, and an 18% premium to the 12-month volume weighted average price.
The indicative price would be reduced by the value of any dividends or other distributions declared, proposed or paid after October 9.
But that isn’t the only option that shareholders have. According to the release, shareholders will also have the option to receive a consideration of $2.75 cash per share and one ordinary share in a newly formed unlisted company that will initially own Navitas. Shareholders will receive one share for every two shares held in the education services provider.
The latter option is subject to both a minimum and a cap “such that the total number of shares rolled over (excluding any shares rolled by the BGH Consortium members) is at least 5% and does not exceed 15% of the post-acquisition equity” in the newly formed company.
The Navitas board has yet to form a view on the merits of the proposal and will work with Goldman Sachs to conduct a detailed review. It will inform shareholders of the outcome of this review in due course.
In the meantime, it has advised shareholders to take no action and warned that there is no certainty that the proposal will result in a transaction.
Should you sell your shares?
If I were a shareholder I would be tempted to sell my shares after today’s rise. After all, there’s only 4.3% more upside if this proposal goes ahead, but there would likely be a significant amount of downside if it fell through.
I would suggest investors consider putting these funds back to work in industry peer IDP Education Ltd (ASX: IEL).
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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 Greencross 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.