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Healthscope share price storms higher on takeover update

In morning trade the Healthscope Ltd (ASX: HSO) share price has been the best performer on the ASX 200.

At the time of writing the private hospital operator’s shares are up 5.5% to $2.19.

Why is the Healthscope share price storming higher?

This morning Healthscope provided positive updates on both the Brookfield and BGH-AustralianSuper consortium proposals.

In respect to the BGH-AustralianSuper proposal, management advised that it has received correspondence indicating that it is able to commence due diligence immediately in relation to its revised preliminary, non-binding proposal to all Healthscope shares for $2.36 cash per share.

The Healthscope board will now consider the correspondence and keep the market informed of any material developments.

In addition to this, Brookfield Capital Partners has confirmed that it has received the majority of all due diligence materials and that based on its enquires and financing discussions to date, “has no reason to believe it would not be willing and able to proceed with the proposal for the acquisition of all shares in Healthscope by way of a scheme of arrangement representing total value of $2.585 per share.”

Further, it advised that if this fails it believes it would be willing and able to conduct an off-market takeover offer representing total value of $2.455 per share including an interim dividend of up to 3.5 cents per share.

Healthscope has reminded shareholders that there is no certainty that the Brookfield proposal will result in a scheme of arrangement or takeover bid being formally proposed.

What now?

While this is good news for Healthscope shareholders and could potentially be the start of a bidding war, I wouldn’t buy shares purely on that basis.

After all, if both proposals were to be withdrawn, its share price would almost certainly crash lower.

Because of this, I would sooner buy healthcare peers CSL Limited (ASX: CSL) and ResMed Inc (ASX: RMD) instead.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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