Why the Japara (ASX:JHC) share price is rocketing 23% in morning trade

The Japara Healthcare Ltd (ASX: JHC) share price is rocketing 23% higher today following a significant announcement. We take a closer look.

| More on:
A drawing of a rocket follows a chart up, indicating share price lift

Image source: Getty Images

The Japara Healthcare Ltd (ASX: JHC) share price is rocketing in early-morning trade following the announcement of a takeover offer.

At the time of writing, the aged care provider’s shares are swapping hands for 98.5 cents, up 23.1%.

Details of the offer

Investors are driving Japara shares higher after digesting the company’s latest release.

In its announcement, Japara advised it has received a takeover proposal from Little Company of Mary Health Care Ltd (Calvary).

Founded in 1885, Little Company of Mary Health Care (also known as Calvary Health Care) provides community and aged care services. The group operates 14 public and private hospitals, 17 retirement and aged care facilities, and a number of community care centres throughout Australia.

The notice is an unsolicited, indicative, conditional, and non-binding proposal. Calvary plans to acquire 100% of the shareholding in Japara by way of a Scheme of Arrangement.

The indicative cash price offered to Japara shareholders is listed as $1.04 per share.

The company noted that the offer price takes into account that no dividends, distributions, or reductions in capital are paid. In addition, no material changes may occur from the date of the takeover notice. This is to ensure that the business does not significantly change in value from what Calvary has offered.

For the proposal to move forward, Japara would need to meet a number of conditions. This includes completion of due diligence, negotiation and executing the scheme arrangement, and unanimous recommendation by the board.

Japara management stated that it has not formed and view and will look into the offer along with business continuity. Trading conditions are expected to improve, and the group is waiting to hear the Australian federal government’s response to the Royal Commission next month.

The Royal Commission looked into aged care quality and safety in October 2018. In March this year, the final report was released, listing 148 recommendations.

Lastly, Japara advised that it will update shareholders and the ASX in due course of the board’s outcome.

About the Japara share price

The Japara share price has gained 60% in the past 12 months, and is up close to 30% year-to-date.

On valuation grounds, Japara commands a market capitalisation of around $213 million, with 267.2 million shares on issue.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Motley Fool contributor Aaron Teboneras 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.

More on Healthcare Shares