Why Healius Drops 6.18% After $2 Billion Takeover Offer

Healius Limited’s [ASX:HLS] share price shed any gains made last week after it was announced that Jangho Hong Kong Limited had made an unsolicited offer to acquire the company.

The company’s share price is currently sitting at $2.59, down $0.15 from the previous close on Friday.

Jango offered an indicative cash price of $3.25 per share and currently is Healius’ largest shareholder, with an overall stake of 15.93% of the issued share capital.

What caused the drop?

In a statement released this morning, Healius announced its board had unanimously rejected Jangho’s offer, stating that the proposal was opportunistic and undervalues the company.

The sources of funding are not apparent from the information provided by Jangho and the proposal is conditional on a number of regulatory approvals that are outside of the control of Jangho, including the approval of Chinese and Australian regulators,’ Healius said in a statement to the ASX.

HLS’s share price has been depressed over the past months, so the drop shouldn’t come as much of a surprise as investor enthusiasm quickly wanes again.

According to one equity analyst, Jangho’s bid of $3.25 falls more than 7% short of the estimated $3.50 fair value, although it would have been paying a 33% premium at the current closing price. It’s likely today’s price drop is due to a sell off from opportunistic buyers who were looking to capitalise on the proposal.

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Is this a cause for shareholders to worry?

While news of the proposal rejection has certainly hurt Healius’ share price, at the current price of $2.59 stocks are up almost 18% from their near three year low.

The pathology and medical centre operator is also on track to deliver a profit for FY19. The company has forecast an underlying net profit at or above $100 million in FY 2019 based on a stronger second half to the year, up from the $92.3 million for FY18.

The firm’s large-scale medical centres have so far generated reliable earnings, and its pathology division enjoys competitive advantages.

According to equity analyst Daniel Ragonese, ‘Healius is leveraged to growing demand from Australia’s aging population, and increased government focus on preventative health should help drive demand in pathology and radiography divisions’.


 Ryan Clarkson-Ledward,

For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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