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Healthscope share price higher on Brookfield takeover update

In morning trade the Healthscope Ltd (ASX: HSO) share price has pushed higher following the release of its unaudited first half results and an update on the Brookfield proposal.

At the time of writing the private hospital operator’s shares are up 3% to $2.43.

What was in the update?

In the first half of FY 2019 the company achieved revenue of $1,224.6 million and operating earnings before interest, tax, depreciation and amortisation (EBITDA) of $198.1 million. This was a 3% and 7.7% increase, respectively, on the prior corresponding period.

The core Hospitals segment was the key driver of growth, delivering revenue of $1,101.8 million and operating EBITDA of $185.7 million. This was a 3% and 8.8% increase, respectively, on the first half of FY 2018.

Healthscope found earnings growth harder to come by in New Zealand. Despite revenue growing 2.9%, operating EBITDA only increased 0.7% during the period.

Looking ahead, Healthscope advised that it continues to target FY 2019 Hospital operating EBITDA growth of at least 10%.

What about the Brookfield proposal?

Healthscope may not be a listed company long enough to report its full year results, though.

This morning management advised that it has entered into an implementation deed with Brookfield Business Partners, under which Brookfield will acquire 100% of Healthscope by way of scheme of arrangement representing total value of $2.50 per share.

Under the terms of the scheme of arrangement, Healthscope shareholders will be entitled to receive total value of $2.50 per share, inclusive of an interim dividend of 3.5 cents per share.

The Brookfield transaction is subject to limited conditions and not subject to financing or due diligence.

According to the release, the Healthscope board has unanimously recommended the Brookfield transaction in the absence of a superior proposal and subject to an independent expert concluding that the scheme of arrangement is fair and reasonable and in the best interests of shareholders.

What now?

With its shares trading close to the offer price, I think its a bit late to get in on this one and investors ought to look elsewhere.

Not that I would necessarily be a buyer of Ramsay Health Care Limited (ASX: RHC) shares just yet. Although Healthscope’s trading update was reasonably positive, I haven’t seen enough in it to believe that Ramsay’s performance will have improved materially. As a result, I feel its shares are still overvalued based on its current growth profile.

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