The merger and acquisition (M&A) space has been active this year. The significant premiums being offered to existing shareholders have presented tidy returns. The combination of the lower dollar and the stable Australian economic conditions should bode well for company prospects in the foreseeable future, and if the European debt crisis avoids a GFC mark II, M&A activity should continue.
Stocks in the News
The significant fall in the Aussie dollar in the past month will help overseas investors as they start to pick off Aussie companies. The first table shows companies with either existing bids on the table, or with significant trading volumes in the recent past, this signifies that investors are taking up substantial stakes in the company.
Table 1: Companies in the news. Note the following haves bids on the table: AOE, GNS, HSP, MCC, SIP.
Reviewing these companies:
AQP – Aquarius Platinum – said to be a Chinese takeover target.
AOE – Arrow Energy has a bid on the table valued at $4.80, from Shell and PetroChina JV.
AXA – has a $12billion offer on the table from NAB. NAB is having problems getting ACCC approval at this point. AMP is yet to lob a new competing bid.
GNS – Gunns – fundamentals are poor, but it has a rumoured takeover target. 250 million shares have changed hands in the past week.
HSP – Healthscope – has three non-binding takeover bids valued around $5.80. HSP has a Return on Equity (ROE) of 10% and EPS growth of 18.8%.
LGL – Lihir – the board has given its support for a Newcrest merger.
MCC – MacArthur Coal – Peabody has put on the table a reduced offer of $15 per share, but was not recommended by the board. MCC has ROE of 16.7% and EPS growth of 20.9%.
NCM – Newcrest – a target for overseas investors being Australia’s biggest gold producer.
ORL – Oroton – consistently pops up in value scans, with a ROE of 74% and EPS growth of 18.8%.
PAN – PanAust – cornerstone investor, Guangdong Rising Assets Management (GRAM) has recently had its standstill obligation lifted on the 26th May’10, after 12 months so is now free to increase its stake. It currently holds a 19.8% stake.
SIP – Sigma – has a proposed non-binding bid of $0.60 per share from Aspen Pharmacare Holdings, which now has access to due diligence.
TAH – Tabcorp – last week the FinReview suggested that a private equity firm and Crown consortium may be looking to bid, however there is no formal offer at this stage.
NUF – Nufarm – fundamentals are poor, but it has seen 20 million shares change hands in the past week, though share price is yet to confirm takeover activity.
Sound Companies with Potential for Takeover
Another list of companies with very good fundamentals (high growth and low debt) is provided below. Put these on your watch list and look for signs of accumulation, and check MDSResearch for highlights.
Table 2: Fundamentally sound companies with room for takeover premium.
Our View
The M&A space is a great place to extract good returns. The recent market pullback and lower Aussie dollar may provide predators with a trigger to step into the space. We have provided you with a list of stocks to watch, so look for signs of accumulation.
By Michael Hevern
Head of Research
Tags: ASX, BHP, GFC, M&A, MDSResearch, merger and acquisition, takeover targets
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