Is Medibank set for a takeover bid?

Medibank Private Ltd (ASX: MPL) may be the target of a takeover offer from a strategic overseas buyer when restrictions on its share registry expire in December 2019.

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Medibank Private Ltd (ASX: MPL) shares closed 3.9% higher today as media reports speculated that an offshore strategic buyer may be building a position in anticipation of an acquisition.

The Australian Financial Review Street Talk column reported that "there is an offshore strategic name that has quietly taken an interest in the $7.1 billion listed Australian health insurer, which may be the beginning of something larger".

After almost forty years as a government enterprise, Medibank was floated on the ASX in 2014. Prior to its IPO, there had been speculation that the company would likely become the target of a takeover, particularly from an overseas bidder.

But when Medibank was privatised and publicly listed, the float came with the restriction that no one investor would be able to buy more than a 15% stake in the health insurer, effectively blocking potential takeovers.

This restriction lapses, however, on December 1 of this year, and an overseas insurer may already be eyeing off Australia's second largest health insurer.

While Medibank shares aren't as cheap as they were a couple months ago, they're still  in the lower end of their 12-month trading range and so the timing wouldn't be bad for a potential buyer to be quietly building its stake. Australian laws designate that a potential acquirer only has to give a "substantial holder notice" to the target company and the ASX once it owns 5% of the target's shares.

All this remains speculation, however, as there's no way of pinpointing what truly drove Medibank's share price gain today.

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Motley Fool contributor Cale Kalinowski has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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