The Motley Fool

Are Healthscope Limited shares a buy as takeover talks continue?

The Australian share market has had its best start to the year since 1991. Driven by gains in financial, telco, retail, healthcare and mining stocks, the Australian sharemarket rose 9.5% in the first quarter.

In the healthcare sector, all eyes have been on Healthscope Limited (ASX: HSO) since the company announced the Canadian investment firm, Brookfield’s takeover offer on February 1.

Year to date, the Healthscope share price has increased by 10.5% to its current price of $2.45. Unsurprisingly, most of the growth in the company’s share price this year happened on the announcement of the takeover offer.

What’s happening with the takeover talks between Healthscope and Brookfield?

Brookfield received approval from the Foreign Investment Review Board (FIRB) to acquire Healthscope Limited in mid-March.

Following the FIRB approval, the Australian Securities and Investments Commission (ASIC) gave Brookfield until April 24 to release the offer documents. Brookfield was given this extra time, compared to the usual two months, as Healthscope wants an independent expert to review the offer documents.

In a nutshell, the public won’t know much until April 24 when the offer documents are released.

Should you buy Healthscope shares right now?

Given the uncertainty about whether Brookfield will acquire 100% or 50.1% of Healthscope, I think it would be wise to stay on the sidelines until a decision is made. And while you’re waiting, look into CSL Limited (ASX: CSL), Estia Health Ltd (ASX: EHE), or Ramsay Health Care Ltd (ASX: RHC). Year to date, these companies have had solid growth in their share prices:

  • CSL Limited share price is up 7.65%
  • Estia Health Ltd share price is up 14.99%
  • Ramsay Health Care Ltd share price is up 9.6%

Foolish takeaway

As you’re researching shares, you may come across a company you’re interested in and find out it’s in takeover talks just like Healthscope.

While it can be tempting to jump in on the action as the company’s name is splashed around in the news, I think it’s best to wait until a decision is made and the hype dies down. This is particularly important for investors with a low appetite for risk as share prices can move violently during a takeover.

If you have a higher risk appetite and you’re looking to profit from an industry set to take Australia by storm, check out this ASX company.

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Motley Fool contributor Nicola Smith has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care 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.

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