Estia Health (ASX:EHE) share price jumps 7% to new 52-week high

The Estia Health Ltd (ASX: EHE) share price has jumped to a new 52-week high after a takeover offer was lobbed at an aged care rival.

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A young man pointing up looking amazed, indicating a surging share price movement for an ASX company

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The Estia Health Ltd (ASX: EHE) share price has jumped 7.5% higher in today’s trade. Shares in the Aussie aged care operator have finished the week on a good note by climbing to a new 52-week high.

Why is the Estia Health share price surging?

Shares in the Aussie aged care operator have surged 7.5% higher despite no new announcements from the ASX company since February.

One factor that could be driving the aged care operator is actually what’s happening to a rival, Japara Healthcare Ltd (ASX: JHC). The Japara share price shot 25% higher today after receiving a takeover proposal valued at $1.04 per share.

Not-for-profit group Cavalry Health Care has today lobbed a takeover offer at Japara. Cavalry is proposing to acquire all Japara shares under a scheme of arrangement which would value it at $277.9 million

Japara shares have rocketed to $1.00 per share on the news and hit a new 52-week high of their own. It looks like that’s causing a ripple effect through the aged care sector as investors wonder about other potential takeover targets.

That has sparked a surge in the Estia Health share price on Friday. The company’s shares have rocketed to a new 52-week high as we approach the end of the trading week.

Foolish takeaway

Aged care operators saw their valuations get smashed in 2020. The coronavirus pandemic and subsequent outbreaks and lockdowns put pressure on ASX shares like Japara and Estia.

The Estia Health share price has recovered in 2021 and currently sits at $2.50 per share. That gives the company a $653 million market capitalisation ahead of Friday’s close.

Conditions such as these are prime for potential takeovers. A struggling sector with depressed valuations could mean others such as Cavalry sniff an opportunity for a good buy.

Investors seem to think that may be the case, with the Estia Health share price shooting higher following the Japara news.

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