Takeover Targets

[grace]

I thought I would bump this thread too. I really haven't seen any lists from brokers, which is unusual as they usually put them out at this time of year.

I'm going to have a stab at

ESG Eastern Star Gas (by Santos)
BOW Bow Energy (by BG Group)
BRM Brockman Resources (by BHP)
AQA Aquila Resources (is it too late there? I haven't been following it lately, hasn't someone started nibbling at it??)

That should do for now.

 

[bigdog]

Todays Herald Sun Melbourne

If you PART from the brave few that went hunting for recession - wounded prey, Austr a l i a n c o mpanies largely spent 2009 cleaning their backyards, raising some spare cash and limiting their losses.

That welcome frugality is now set for a dramatic shakeup.

In 2010, companies will begin to look over the fence again — into someone else’s backyard, hoping to conquer and expand their boundaries and add vital assets to their kingdoms.

Market analysts believe the new year will bring with it a marked increase in company takeovers, mergers and acquisitions, as businesses look to strengthen their frame ahead of what looms as a prolonged period of economic growth.

And apart from the takeoverhungry companies, it’s the savvy investors who stand to gain. Not by predicting who the predators will be, but by buying shares in the likely prey, and playing the waiting game.

Take BHP Billiton’s on-again off-again hostile takeover bid for fellow giant miner Rio Tinto, which first reared its controversial head shortly after the share market peaked in November 2007.

Rio Tinto shareholders had enjoyed a steady rise in the company’s share price for several uninterrupted years and were sitting comfortably on November 7, 2007, with the share price near record highs at $88.50.

After the audacious bid to merge the two miners landed the following day, sending both companies into a trading halt, Rio Tinto shares catapulted to $108.84 on November 9, surging as high as $123.05 in the following weeks.

Those savvy investors who predicted a takeover bid made 22 per cent in two days, and if they sold at the top weeks later, they pocketed 39 per cent amid the upheaval.

While there was a general dearth of takeovers in 2009, investors still had a few surprise bids to make some quick coin.

AXA Asia Pacific shares shot up 35 per cent when a bid from AMP hi t t he markets i n November. The investors who held steady and still own the shares recorded a healthy 51 per cent gain.

Apart from creating acronymic disorder, AMP and AXA SA’s proposed takeover of AXA Asia Pacific — which was quickly followed by an attempt by NAB to buy AXA — may indeed be the f i rst major gobble-up on the cards in 2010.

Here are some points to look for when attempting to pick a takeover target.

Resources, Resources, Resources
If you believe the Chinese story, then resources will continue to be of interest,’’ MM&E Capital analyst Tom Elliott says.

And none come bigger than a possible tie-up between BHP Billiton and Rio Tinto, which MM&E Capital continues to believe will come to fruition, in some shape or form.

There is also the continued threat of cashed-up Chinese companies such as Chinalco, which has a 9 per cent share in Rio Tinto, or leading steel mills Baosteel or Wuhan Steel, stepping up their plans to own a major Australian iron ore play. That is, if the Foreign Investment Review Board and the Australian Competition and Consumer Commission relax the stance on Chinese interest in major Australian mining assets, something that MM&E Capital believes is a huge stumbling block for the foreign raiders.

Mid-Tier Miners are Ripe for the Picking
Though the debt requirements are a concern, there is usually no better way for a mining company to grow than by bolton acquisitions that unlock synergies.

In the realm of mid-cap mining assets, there is a smattering of companies that could face that knock on the door from a larger competitor, analysts say.

And there is no shortage of appetite from a predator’s point of view, given Macarthur Coal’s raid on Gloucester Coal in recent weeks, and the announcement from OZ Minerals that it will look to acquire mining assets in the new year.

Analysts at broking house Patersons believe companies such as Cudeco, Sandfire Resources and Rex Minerals could be in OZ Minerals’ sights.

Gold companies will also warrant some attention, given the dwindling supplies of the precious metal the world over.

Gas and Coal are Boiling
Once again Santos is likely to come under attack on multiple fronts from multiple nations, given its highly coveted coalseam gas assets, its Cooper Basin operations, and its offshore projects. Whenever major gas players merge, such as the Suncor and PetroCanada tie-up last year, Santos is always mentioned in the next breath as the next kid on the block to be bought.

Companies such as Northern NSW group Eastern Star Gas and Brisbane-based Arrow Energy may find themselves with an offer or two.

But perhaps the hottest takeover gossip will focus on Australia’s plethora of up-andcoming coal companies, which are all riding the wave of Chinese and Indian demand for the commodity.

The start has been made by China’s Yanzhou Coal Mining which bought Felix Resources for a cool $3 billion in August 2009, while the aforementioned $668.8 million raid by Macarthur Coal on Gloucester Coal was lodged last week.

One company that will come under the spotlight is Whitehaven Coal, which grew in value by a staggering 316 per cent last year.

Splits Open Up Opportunities
Often companies that separate a diversified business into two part s , t hus s t r i ppi ng out underperforming sectors of the company, thrust themselves into the takeover spotlight.

Case in point: Foster’s and CSR.

With the former separating its lucrative beer business from its suffering wine operation, analysts are predicting a few buyers to come knocking for the newly formed beer company. In fact, the stock is atop of Mr Elliott’s list of probable takeover targets.

Though it has hit a legal hurdle, CSR is also attempting to rip the best bits — its sugar and renewable energies division — out of the company and separately list its lossmaking building supplies and property operation.

The cash-cow sugar business will no doubt attract attention.

Others to Watch
Others that may attract attention are Consolidated Media Holdings — given Seven’s Kerry Stokes owns 20 per cent of the company — AWB, logistics group Asciano, Seek, and Caltex.

Mr Elliott mentions the real estate and infrastructure sectors as other likely arenas for takeover activity in 2010.

But he believes takeovers and mergers will not be sector specific. He often focuses on stocks with strategic shareholdings.

‘‘We run one fund that tries to predict takeovers, and what we look for is strategic shareholdings in companies, as more t h a n h a l f t h e t i me wi t h takeovers there was already a holding in question that caused the bid to occur,’’ he says.

Austock’s Mr Heffernan predicts there will be consolidation in the healthcare sector, with four primary players — Sonic Heathcare, Healthscope, Ramsey Heath, Primary Health Care fighting for the top rung.
345

 

[sammy84]

If the correction is over (big if), I would expect to see another round of takeover offers.

I'm looking at targets where a company has already taken up the the maximum allowable 20% holding and the targets price has been battered down lately. My list currently comprises:


BRM- Wah nam have a 20% interest. They are not buyer of commodities so must be looking for a bid soon.
CEY- Banpu has a 20% interest. Banpu are a coal miner so whether they will look to takeover or maintain a strategic interest is unclear.
MCC- Hard to see activity dying of here. Price has come off about 40%, so a lot of upside.

Any more? Help please

 

[geea]

Sammy. MAH meets that criterior with LEI holding about 20% and the price having come down frommid $0.80's to low $0.50's

 

[Logique]

Overseas buyers are known to come sniffing around at signs of weakness in our coal companies. Since the April high:

WHC 6.00 down to 4.42
CEY 4.80 down to 3.58
MCC 16.60 down to 10.39

Wouldn't surprise in the case of any of the above.

 

[Miner]

I am guessing TOE will be a take over target by either BHPB Uranium or Mega Uranium.
TOE is lagging and does not have the strength to put the plant. Yeelirrie is promising in the same area and a golden cow for BHPB. So is Mega Uranium with Canadian support.
Time frame could be one to two years. Once Yeelirrie gets EPA permission, BHPB will snare TOE overnight.

My guess and DYOR

 

[sammy84]

Overseas buyers are known to come sniffing around at signs of weakness in our coal companies. Since the April high:

WHC 6.00 down to 4.42
CEY 4.80 down to 3.58
MCC 16.60 down to 10.39

Wouldn't surprise in the case of any of the above.

Agreed with all of these. Especially MCC. THe reduced MCC takeover bid might have been an opportunistic play by Peabody given market conditions at the time. If the market can kick higher from here and more clarity is given regarding the RSPT, then the activity would hopefully resume. Does anyone know if there are options available for MCC?

 

[nunthewiser]

. Does anyone know if there are options available for MCC?

http://www.afrsmartinvestor.com.au/tables.aspx

 

[nunthewiser]

Thanks Nun you are a true internet guru

No worries Sam, happy to help with queries anytime i can

 

[sammy84]

No worries Sam, happy to help with queries anytime i can

Haha, thanks, it saved me actually thank you.

Unfortunately no options for MCC

 

[nunthewiser]

LOL sorry was just being a smartarse.

yeah i looked also , couldnt find any ........ CFD,s not a consideration? or too expensive for your purposes/planned hold time?

 

[sammy84]

LOL sorry was just being a smartarse.

yeah i looked also , couldnt find any ........ CFD,s not a consideration? or too expensive for your purposes/planned hold time?

Yeah too much risk to hold for a prolonged period.

IOH is another one that should be added. Price has pulled back from 2.71 to 1.86. Chinese company Sumisho is a substantial holder along with one of Kerry Stokes investment co. Current price levels do not adequately price in the potential of a takeover.

 

[skc]

Been quite here for a little bit, even though the market is heating up on the M&A front.

Here's an article from The Australian on Deutsche Bank's list of M&A targets - sounds more like a wet dream than real imo.

http://www.theaustralian.com.au/bus...ctivity-picks-up/story-fn4xq4v1-1225945114800

He flagged several possible deals, including an HSBC bid for Suncorp, an Axa SA bid for Axa APH, a merger between Bank of Queensland and Bendigo Bank, a big-four bank bid for Challenger Financial Services Group and a merger of QBE and IAG.

In a wide ranging look at possible activity, Baker’s key picks include Oil Search, WorleyParsons, Asciano, Adelaide Brighton, Resmed, Aristocrat Leisure, Challenger Financial Services Group, Dulux, Foster’s and Infigen Energy.

Looking back at the thread the hit rates were pretty low. Of the 25+ stocks mentioned here, only 5 or 6 picks have actually received takeover offers. A few of them eventuated to nothing (MCC, RCI, NUF, NXS) while a few is probably still possible (WHC, TAH?).

 

[YELNATS]

Regarding "a merger between Bank of Queensland and Bendigo Bank", BOQ made a merger offer for BEN a few years ago, but BEN rejected it on the basis of it not being a good fit/not much synergy.

Instead BEN went ahead and acquired Adelaide Bank.

That's not to say it couldn't happen at some future time though.

 

[awg]

WHC is my highest conviction hold for this strategy, see todays announcement.

IRN has strong takeover interest atm, but the likely premium does not look all that flash.

Plenty of talk and detail about ESG

KAR ... a tiny hint of Chinese big fish gobbling them up?

PRU is another imo, that has many good elements to its story

Some details on the relevant threads

disclaimer, I hold these stocks

 

[skc]

WHC is my highest conviction hold for this strategy, see todays announcement.

IRN has strong takeover interest atm, but the likely premium does not look all that flash.

Plenty of talk and detail about ESG

KAR ... a tiny hint of Chinese big fish gobbling them up?

PRU is another imo, that has many good elements to its story

Some details on the relevant threads

disclaimer, I hold these stocks

Have to agree that every decent coal and gold stocks are targets at the moment. Very little doubt that WHC won't be around for long.

The gas guys however are all talk and no action. But if someone was to get the ball rolling then there will probably be a string of deals. ESG while attractive is somewhat captive to STO and that may not be the best in terms of takeover premium.

 

[awg]

I agree with regards to ESG, dissapointing SP, and not much premium as things stand, however, they are trying to manouver themselves for some leverage with Japanese buyers.

I deleted my initial remark to this effect.
I intend to continue to hold for the time being though

KAR is dissimilar to ESG, due to location of big interests off WA and Brazil etc.
High volatility for a stock verging on ASX100

 

[MEGALADON]

Have to agree that every decent coal and gold stocks are targets at the moment.

Is that you Charlie ?

 

[sammy84]

If the correction is over (big if), I would expect to see another round of takeover offers.

I'm looking at targets where a company has already taken up the the maximum allowable 20% holding and the targets price has been battered down lately. My list currently comprises:


BRM- Wah nam have a 20% interest. They are not buyer of commodities so must be looking for a bid soon.
CEY- Banpu has a 20% interest. Banpu are a coal miner so whether they will look to takeover or maintain a strategic interest is unclear.
MCC- Hard to see activity dying of here. Price has come off about 40%, so a lot of upside.

Any more? Help please

Ok so BRM worked out nicely.

Now looking for new targets. One the leading indicators of late has been the situation where there is an overseas company with a 19.9% interest. Would also have to be restricted to the commodities space. Anyone able to offer up more companies which fit these criteria?

 

[mr. jeff]

I know it's not an overseas holder, but

At 21 October 2010 the top 20 Shareholders of Exco were as follows:
Current units Percentage
1 Ivanhoe Australia Limited 79,288,632 22.88%
2 JP Morgan Chase & Co (Uk) 29,300,804 8.46%
3 WH Soul Pattinson & Co Ltd 25,847,365 7.46%
4 JP Morgan Nominees Australia Limited 19,407,112 5.60

modified quote for addition of symbols only.

from EXS latest quart report.

May have already been discussed. Has been raised in the media a few times.