Takeover Targets

[Sean K]

Re: Next Merger or Takeover (your guesses)?

Barrick Gold out tis am stating they are after acquisitions in the Asia Pacific with 2m oz or more. Puts NCM and LHG clearly on radar. These two stocks should do ok today.

 

[michael_selway]

Re: Next Merger or Takeover (your guesses)?

UGL, WOR or DOW.

Just plucks really though.

The theory is that with the current tighness in the labour market and dearth of mining equipment availability the only way to really grow it to bolt on companies with already good contract books and integration synergies.

I'm actually surprised there hasn't been more M&A in the mining services sector. Perhaps they've all just been too busy lapping up all the work they've ben getting the past 3 years.

Speaking of DOW

what happened today?

thx

MS

 

[Sean K]

Re: Next Merger or Takeover (your guesses)?

Reported a net loss of $25m yesterday due to the Iluka Mineral Sands project fiasco. Revenue of $4.7b and underlying profit $138m.

I have held DOW for about 3 years (ave cost $3.80ish) and ridden it from the lows to recent high of $9.50ish. Was thinking about buying more recently during the correction. Few!

I tried to dump it all this am at $7.00, but alas, no where near it. Paper gains diminishing fast.

This is a knee jerk reaction. Iluka is a one off. I hope. I'm holding for now.

 

[Sean K]

Re: Next Merger or Takeover (your guesses)?

Perhaps DOW will be a takeover now?? None of the senior management are left to fight it.

I reckon today's 30% drop was an overreaction and have taken a bold punt and bought a few more this afternoon expecting a bounce of some sort tomorrow. 30% drop for a $2.3b + company is a knee jerk.

I think there will at least be a dead cat pending further information.

 

[TjamesX]

Re: Next Merger or Takeover (your guesses)?

I'm going to put my tip in....

BOL to have a tilt at PCG

BOL have just released record profits and have stated they are in the acquiring mood. PCG is a perfect complement for their business with good overseas exposure.

Personally as a PCG holder I hope that they don't as I believe PCG is undervalued.....

Cheers,
TJ

 

[dubiousinfo]

Re: Next Merger or Takeover (your guesses)?

It would be hard to see BOL go after PCG. Crane hire & saffold hire are like chaulk & cheese. I think there would be other targets for BOL that would be more complimentary to their business.

 

[TjamesX]

Re: Next Merger or Takeover (your guesses)?

It would be hard to see BOL go after PCG. Crane hire & saffold hire are like chaulk & cheese. I think there would be other targets for BOL that would be more complimentary to their business.

Fair enough - I thought BOL's hiring was more varied than cranes, but having a look at their website it appears that's pretty much all they do. However they do have similar customers and operate in similar industries..... From BOL's perspective I would have thought PCG could offer diversification (both in terms of type of equipment hired and overseas exposure)

 

[Profitseeker]

Re: Next Merger or Takeover (your guesses)?

Barrick Gold out tis am stating they are after acquisitions in the Asia Pacific with 2m oz or more. Puts NCM and LHG clearly on radar. These two stocks should do ok today.

and BDG. I read that larger companies are sniffing around so they can increase their resource levels.

 

[Sean K]

Re: Next Merger or Takeover (your guesses)?

Profit,

Agree BSG another that has a very significant resource but do they have over 2m oz at Eaglehawk and Kangaroo Flat? I looked at their last anns but couldn't find a total resource base.

Other miners that might be on the radar:

AGC now has over 6m oz with the Matabe project having 5.3m oz alone and a significant new find at Wiluna.

EMP has nearly 9m oz in it's 3 main projects.

CTO's Charters Towers inferred resource is over 10m oz.

IRN has 14.6m oz in the Tampakan project in Phillipines. However, Xstrata have the option to acquire a 62% stake in this excisable in Sep.

Note: I hold NCM, LHG, AGC and IRN.

 

[blobbob]

Re: Next Merger or Takeover (your guesses)?

CRK - Carrick gold another one 2.2moz @ 2.4g/t near kalgoolie,

 

[Sean K]

Re: Next Merger or Takeover (your guesses)?

Read in the Fin this am that rumours were about that HSP were under the microscope of a private equity firm. Might explain the recent strength in the sp.

 

[noirua]

Re: Next Merger or Takeover (your guesses)?

Next bid: possibly Wesfarmers for Felix Resources.

 

[Sean K]

Re: Next Merger or Takeover (your guesses)?

1005 [Dow Jones] Entire Australian resource sector could be picked off by global corporates in next two years, says Southern Cross Equities director Charlie Aitken. "The refusal by the equity market to price any form of structural change in long-term commodity prices is making the entire sector vulnerable to low-balled cash takeovers. Says Minara (MRE.AU), Kagara (KZL.AU), Alumina (AWC.AU), Oil Search (OSH.AU), Western Areas (WSA.AU), Iluka (ILU.AU) "sitting ducks". Adds low valuations of BHP (BHP.AU), Rio Tinto (RIO.AU) could make them vulnerable to takeover. (DWR)

 

[Realist]

Re: Next Merger or Takeover (your guesses)?

I'm thinking another stronger bid for MTN will eventuate soon.

And AMC as well.

We'll see...

 

[NettAssets]

Re: Next Merger or Takeover (your guesses)?

WES

Some restructure of wesfarmers energy and the divestment of the coal mining opp. into a seperate entity - looks like they are making some room for changes.
Changes in Management too as Mr Robb goes to Iluka Resources.
I think that probably puts paid to the idea I had that they may pick up a small resources Co because I think that would have been sufficiently attractive for Peter to remain.
Look out for another energy aquisition - More gas?
is OSH too big for them to swallow?

John

 

[binginbarrel]

Re: Next Merger or Takeover (your guesses)?

JMS
Jupiter Mines who have a diggings on Mt Ida in WA
Tipped to merge with IGC International Goldfields Limited

Share price for JMS in mid September tipped to reach .35cents.

 

[doctorj]

Re: Next Merger or Takeover (your guesses)?

I expect there to be action over at Wesfarmers - they're facing a tough period to maintain their crown of market darling so I expect them to start making some moves.

Other possibilities include expanding production of Wesfarmers Energy or buying another insurer to grow that side of their business.

Told you so. Check out today's announced $700mill takeover bid for OAMPS. http://www.news.com.au/business/story/0,23636,20359155-462,00.html

 

[Ken]

Re: Next Merger or Takeover (your guesses)?

what about iag?

on no substance integra mining

 

[YOUNG_TRADER]

Re: Next Merger or Takeover (your guesses)?

STO trying to buy QGC for $606m anyone pick that?

 

[scsl]

Re: Next Merger or Takeover (your guesses)?

Looks like there'll be no end to this private equity madness anytime soon! Article in The Age today talks of a change in capital gains tax law for foreign investors - they're now fully exempt! It also talks (towards the end of the article) of a structural change in the sharemarket because of the continuing frenzy of takeovers.

New tax break may trigger a takeover tsunami
Malcolm Maiden
December 18, 2006

IT IS likely to be a short Christmas break for the sharemarket and the private equity raiders who are pulling share prices up by their own bootlaces. Although the Federal Government apparently does not believe it, a change in the way overseas investors are assessed for capital gains tax sets the stage for an increase in the already astonishing volume of private equity-backed takeover bids in this country.

The changes, passed by the Senate on December 6, a year-and-a-half after they were announced, exempt overseas investors from paying tax on gains in the value of shares, including major stakes in listed companies. In effect, foreign investors are now excused from paying capital gains tax on investments that do not involve the acquisition of property, including resources.

The measures got through the Senate after Labor sided with the Government to head off opposition from the Greens, the Democrats, Nationals Senator Barnaby Joyce and Family First senator Steve Fielding. Joyce said that nobody had been able to explain to him "how I could tell someone in a pub in Ipswich why an overseas private equity fund raider should get a capital gains tax break on Australian investment that Australians cannot get".

But the concessions are really designed to bring Australia into line with the tax regimes Australians have to comply with in major countries overseas, including the United States and Britain.

That's fair enough: Australia needs foreign investment, and it can hardly expect to get as much as it wants if competing venues are levying less tax on investment.

Introducing the concession in the middle of the biggest takeover boom in the Australian market's history is, however, the equivalent of pouring petrol on a bushfire.

Finance Minister Nick Minchin reportedly said that Australia had to have an "internationally competitive" tax system, and that suggestions that the tax advantage would generate a tsunami of takeovers backed by foreign private equity groups was absurd, because private equity funds accounted for less than 1 per cent of corporate activity, but the reality is somewhat different.

Private equity funds are the key force in the present takeover boom, and the takeover boom in turn is the key force in the market's rise in recent months to record levels that fundamentals, including earnings, no longer confidently support.

And with the new capital gains tax regime in place, the pace is set to accelerate. Takeover advisers inside the big investment banks say that a flotilla of big takeovers has been held back for the capital gains tax change, which will allow foreign buyers including the private equity funds to pay more for a company than the locals and still achieve the same return. Now that the new tax regime is law, these deals will begin rolling in.

The process is circular, and could have structural implications for this market, which is now producing less share equity than it is consuming. On Goldman Sachs JBWere's estimate, there has been $69.7 billion worth of takeovers concluded this year. Most have been cash takeovers that are removing shares from the system, because cash can be raised through borrowings very cheaply.

Citigroup estimates, on the other hand, that over the same time only $42.6 billion worth of new shares have been issued. That includes just a little more than $8 billion of initial public offerings (company floats), sharply down from about $15 billion in 2005, about $10.6 billion worth of share placements, and $8.7 billion for the first T3 payment on Telstra shares (the balance is not due until May 2008).

Takeovers are therefore sucking shares out of the market at a greater rate than they can be replaced, and the shortfall is even greater when the steady flow of multibillion-dollar corporate share buybacks are taken into account.

What is really sobering is that the gap is likely to widen. While $69.8 billion worth of takeovers have been completed this year, acquisitions worth the same amount are already being pursued, including the Qantas private equity privatisation. The swathe of takeovers that investment bankers say are imminent would come on top of that. On the supply side, there will not be a Telstra share sale next year, and the company float pipeline is far from full.

The best companies have either been sold into the three-and-a-half-year-old bull market or snapped up by the insatiable private equity funds, which now need to spend far more than $500 billion a year just to get the investor money they are receiving back out the door.

The takeover boom is supporting share prices in the short term, because cash freed up by the takeovers is chasing a dwindling number of shares that remain listed. But if the trend persists, a sharemarket that is already badly imbalanced, with financial companies accounting for about two-thirds of total market capitalisation, will continue to lose diversity, and arguably, depth.

At the very least, that process will force Australian fund managers to buy more foreign shares. At worst, it could narrow the base to a point where the market is in danger of losing critical mass, particularly in industrial share sectors.

Other sharemarkets, including those in Europe, are losing diversity and shrinking for the same reasons, and the flow could reverse when the private equity funds start re-floating the businesses they have acquired.

That process could take a while, however. Unless there is a huge resale profit on offer, companies such as Qantas, PBL and Flight Centre that have gone private for strategic reasons may not return until debt funds become scarcer and more expensive, and the cost of raising money in the equity markets once again becomes competitive.

And there is so much cash in the global system that those circumstances are not yet even on the horizon.

mmaiden@theage.com.au