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Aveo share price rockets 5% higher ahead of potential takeover

The Aveo Group Ltd (ASX: AOG) share price has led the S&P/ASX 200 (INDEXASX: XJO) gainers this morning after entering a Scheme Implementation Deed for the sale of 100% of its shares.

What did Aveo announce this morning?

Prior to market open, Aveo shares were trading at $2.02 per share but surged more than 5% higher to $2.125 per share at the time of writing.

The catalyst for the share price jump was an announcement that said that 100% of Aveo shares were to be acquired by Brookfield Property Group on behalf of its managed funds.

According to the release, Aveo shareholders would be entitled to receive cash consideration of $2.195 per security (inclusive of its FY19 annual distribution), which represents an 8.7% increase on its pre-market open price.

The entering of the Scheme of Arrangement comes after a strategic review by the company to evaluate various bids for Aveo securities.

Aveo said conditional scrip consideration is also available to Aveo shareholders, while the cash consideration represents a ~28% premium on its “undisturbed” closing price of $1.71 per share on 12 February 2019, prior to it receiving any bids.

The bid values Aveo’s equity at $1.3 billion, compared to its current $1.17 billion market cap, with an enterprise value of $2.0 billion.

Aveo’s directors have unanimously recommended that Aveo shareholders vote in favour of Brookfield’s offer in the absence of a superior proposal, which has sent the Aveo share price surging higher this morning.

What’s the story behind the deal?

Aveo has made several strategic review updates since its half-year results on 13 February 2019 as part of an ongoing look at the company’s operational profile.

The Aussie owner, operator and manager of retirement communities announced that a number of indicative, non-binding takeover bids had been received in late January 2019.

Even at the $2.12 per share mark, the Aveo share price is somewhere in the middle of its 52-week trading range, with investors clearly expecting the transaction to get through any necessary regulatory approvals.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.