This ASX All Ords stock is rocketing 20% after accepting a takeover offer

These two diagnostics companies are planning to merge their operations.

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The market may be edging lower on Monday but that hasn't stopped one ASX All Ords stock from rocketing.

In morning trade, the Capitol Health Ltd (ASX: CAJ) share price is up 20% to 29.5 cents.

Why is this ASX All Ords stock rocketing?

Investors have been scrambling to buy the diagnostic imaging modalities provider's shares this morning after it accepted a merger offer from rival Integral Diagnostics Ltd (ASX: IDX).

According to the release, the two parties have entered into a process and exclusivity deed that will see Integral Diagnostics acquire 100% of Capitol Health via a scheme of arrangement.

The offer that was tabled was an implied exchange ratio of 0.12849 Integral Diagnostics shares for every Capitol Health share. Based on Friday's close prices, this equates to an offer of 32.6 cents per share, which represents a 33% premium.

Capitol Health's chair, Andrew Demetriou, commented:

The Indicative Proposal reflects attractive value for Capitol shareholders and the Board has determined that it is in the best interests of shareholders to engage with Integral.

Capitol Health advised that that each director intends to recommend shareholders to vote in favour of the proposed transaction. This is subject to entry into the implementation deed, the absence of a superior proposal, and the independent expert's report.

Not the first offer

The release notes that this indicative proposal was not the first. It follows an unsolicited approach from Integral Diagnostics in late March regarding a potential combination.

However, while that was not accepted, the ASX All Ords stock's board decided that it was in the best interests of shareholders to engage with Integral Diagnostics and provide non-public information on a confidential and non-exclusive basis to conduct a two-way value based due diligence process.

Following the conclusion of the process, Integral Diagnostics submitted the improved indicative proposal, which has now been accepted.

The ASX All Ords stock's managing director, Justin Walter, commented:

Today's proposed merger announcement with Integral, represents an exciting opportunity for all our valued radiologists, technicians, and staff to be part of Australia's largest pure-play publicly listed imaging company.

This opportunity is a result of their dedicated hard work, particularly over the last five years. The merger will create further value for our shareholders by realising significant benefits through scale, enhanced internal capability, and organic growth.

All underpinned by market leading clinical standards and service to our referrers and their patients.

As things stand, Capitol Health shareholders do not need to take any action regarding the proposal. However, the company warned that it cannot be certain that the proposal will result in a binding transaction.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Integral Diagnostics. 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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