ASX 200 stock jumps 11% on fresh takeover offer

Is a bidding war about to start for this financial services company?

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Insignia Financial Ltd (ASX: IFL) shares are starting the week in a positive fashion.

In morning trade, the ASX 200 stock is up 11% to a 52-week high of $3.94.

Man drawing illustration of a big fish eating a little fish representing a takeover or acquisition.

Image source: Getty Images

Why is this ASX 200 stock rising today?

Investors have been picking up the financial services company's shares today after it revealed that it has received a new takeover offer.

Last month, private equity firm Bain Capital tabled a non-binding offer of $4.00 cash per share to acquire Insignia Financial. This offer represented a 17.6% premium and valued the company at approximately $2.68 billion.

However, the Insignia Financial Board rejected the offer and advised that it believed "the Proposed Transaction does not adequately represent fair value for IFL shareholders in the context of a change of control transaction and that it is not in the best interests of IFL shareholders to engage with Bain Capital in relation to the Indicative Proposal."

It seems that another private equity firm was watching very closely and has now decided to make an offer of its own.

New takeover offer

According to the release, the ASX 200 stock has received a confidential, non-binding, and indicative proposal from CC Capital Partners.

It is offering to acquire all of the shares in Insignia Financial by way of a scheme of arrangement at a price of $4.30 cash per share. This will be adjusted for any dividends paid or payable after the date of the indicative proposal). Its offer also comes with a potential cash alternative to roll into unlisted stub equity, subject to caps and scale-back.

This represents a 21.4% premium to its last close price and a 7.5% premium to Bain Capital's offer.

Though, it remains subject to a number of conditions. This includes the satisfactory completion of due diligence on an exclusive basis and execution of a binding scheme implementation agreement.

The scheme implementation agreement would also be conditional on a unanimous recommendation from the Insignia Financial Board, commitment from all directors to vote in favour of the transaction, and approval from CC Capital's investment committee.

What's next?

The ASX 200 stock advised that its board and financial and legal advisers are now considering the indicative proposal to assess whether it is in the best interests of shareholders.

However, they have warned there is no certainty that it will result in a binding offer or that any transaction will eventuate. As a result, it advised that shareholders do not need to take any action in relation to the proposal. It intends to continue to keep the market informed in accordance with its continuous disclosure obligations.

All eyes will now be on Bain Capital to see if it returns with a competing offer.

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 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 Scott Phillips.

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