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Here’s why the Regis Healthcare (ASX:REG) share price is crashing 11% lower

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The Regis Healthcare Ltd (ASX: REG) share price has come under pressure on Wednesday morning.

At the time of writing, the aged care operator’s shares are down a sizeable 11% to $1.65.

Why is the Regis Healthcare share price sinking lower?

Investors have been selling the company’s shares this morning following the release of an update by Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) on its takeover approach.

Back in September, Washington H. Soul Pattinson (WHSP) submitted a non-binding, indicative proposal to acquire Regis Healthcare.

WHSP tabled an offer of $1.65 per share to acquire the company, which represented a 48% premium to the one-month volume weighted average price (VWAP) of Regis shares on 29 September 2020.

This approach was rejected by the company, leading to WHSP coming back with an improved offer in November.

The investment house, together with its partner Ashburn Pty Ltd, an entity controlled by Bryan Dorman (a co-founder and major shareholder of Regis Healthcare), made a non-binding, indicative proposal to acquire Regis for $1.85 per share via a scheme of arrangement.

This offer was subject to due diligence and represented a 59% premium to the one-month VWAP of Regis shares on 19 November 2020.

WHSP believes that the two proposals provided Regis shareholders with a highly attractive opportunity to realise value for their shares in light of the significant uncertainty and funding challenges currently facing the aged care industry.

However, with both proposals being rejected by the board of Regis and WHSP apparently unwilling to go higher, it has now withdrawn its non-binding indicative proposal and also ceased its association with Ashburn Pty Ltd and Bryan Dorman.

At the time of writing, Regis Healthcare has not responded to this news. However, it previously stated that it believes it “materially undervalues the company given its medium to long term prospects and does not offer fair value to shareholders.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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