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Healius share price storms 11% higher on takeover news

The Healius Ltd (ASX: HLS) share price has continued its fine form in 2019 and risen a further 11% to $2.71 on Thursday.

This brings the healthcare company’s two-day return to a sizeable 21%.

Why is the Healius share price up 11% today and 21% in 2019?

This morning Healius, formerly known as Primary Health Care Limited (ASX: PRY), announced that it has received an unsolicited and highly conditional proposal from Jangho Hong Kong Limited to acquire all of the shares that it does not already own by way of a scheme of arrangement.

Jangho Hong Kong Limited is a wholly owned subsidiary of the Jangho Group, which owns 15.93% of the issued share capital of Healius.

The preliminary, non‐binding indication of interest has a cash price offer of $3.25 per share. Though this price will be reduced appropriately to the value of any dividends proposed, declared or paid.

At this stage the Healius board has not yet formed a view on whether the price offered is at a level which it is prepared to recommend to shareholders. But it has commenced its assessment of the proposal and will keep the market informed in accordance with its continuous disclosure obligations.

It reminded shareholders that it is committed to acting in their best interests and advised them to take no action in relation to the proposal at this stage. It also warned that there is no certainty that the proposal will result in a transaction.

Why did its shares spike on Wednesday?

Considering the Healius share price stormed notably higher yesterday when the market was crashing lower, it will no doubt raise a few concerns with investors. Though, the spike could potentially have been caused by Jangho Group buying up as many shares as it could before making the offer.

I wouldn’t be surprised if the ASX hits the company with a price query notice today.

Should you buy Healius shares?

With the offer price at $3.25 and its share price at $2.71, there certainly would be a lot of upside for its shares if the proposal were to go ahead.

But as the announcement explains, the proposal is highly conditional and not guaranteed to go ahead.

Conditions include due diligence, Jangho’s board approval, debt financing, Australian regulatory approvals (including the Foreign Investment Review Board), Chinese regulatory approvals, and the execution of definitive transaction implementation documentation on acceptable terms to Jangho.

In light of this, I would suggest investors keep their powder dry and see how things unfold over the coming months.

In the meantime, healthcare shares such as Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL) could be worth considering.

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