LifeHealthcare Group Limited

Small-cap fat dividend payer, LifeHealthcare Group Limited’s (ASX: LHC) stock surged up 40.5% on February 06, 2018 as the group has entered into a binding Scheme Implementation Deed with Pacific Health Supplies BidCo Pty Limited, an entity wholly-owned by funds advised by Pacific Equity Partners (PEP). Under the takeover scheme, PEP proposes to acquire 100% of the shares in LifeHealthcare by way of a Scheme of Arrangement for $3.75 per share in cash. The offer price represents 46% premium to the closing price of A$2.57 per share on February 02, 2018 and 44% premium to the 1-month volume weighted average price (VWAP) to February 02, 2018; and brings LHC’s fully diluted market capitalisation of A$179 million and an enterprise value of approximately A$211 million.

The key is that LifeHealthcare shareholders will be entitled to receive $3.75 per share in cash subject to all applicable conditions being satisfied or waived and the Scheme being implemented and LifeHealthcare can declare and pay a fully franked interim dividend in relation to the six months to 31 December 2017 (Interim Dividend) while the Scheme Consideration would be reduced by the cash amount per share of the Interim Dividend. The Interim Dividend will be advised with the release of LifeHealthcare’s first half FY2018 results (February 20, 2018). In addition, there might be a fully franked special dividend declaration of $0.18 per share at the discretion of the LifeHealthcare Board for payment and reducing the Scheme Consideration in effect.

While the board is in favour of the deal in the absence of a superior proposal, Scheme Meeting is expected to be held in May 2018.

Meanwhile, LHC’s preliminary unaudited summary financial performance for the six months to 31 December 2017 indicated revenue growth of 9.1% to $67.3 million over restated prior corresponding period, 9.8% growth in underlying EBITDA and 10.6% growth in underlying NPATA.

As the deal looks favourable, we give a “Hold” on the stock at the current price of $3.61

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