Australian (ASX) Stock Market Forum

Takeovers unlikely to happen soon...

Jump to new
prawn_86

prawn_86

Mod: Call me Dendrobranchiata
Joined
23 May 2007
Posts
6,637
Reactions
7
Lately i have been seeing a lot of fundamentalists posting that "XYZ must be a t/o target soon". And i must admit i have also being guily of this myself. :eek:

However, in this current climate, i think it is unlikely for any/many takeovers to happen anytime soon, for the following reasons:

1. Whats to say some comapnies cant get cheaper? In current climate anything can happen, so why pay $1 now when it could be 80c in a months time. This is the whole "falling knife" thing, and the acquirers certainly dont want to pay too much.

2. Lack of credit/poor capital raising participations. A double edged sword for predators. Its now harder and more expensive to obtain debt, and capital raisings have low participation rates at the moment due to the economic climate.

3. Co's are too busy trying to maintain their own SP. The last thing they want to deal with is having to merge another company in with themselves.



Thoughts/comments...? :)
 
Uncle Festivus said:
It's a bit like the progressive sale - the price is falling but when to buy - or miss out?
Click to expand...

Yes, but for takovers its on a much larger scale.

Its all well and good for us small investors to try and pick close to a bottom, but if you were buying the whole co then a few cents can makes millions of dollars difference.

Plus the fact that there is no guarantee the T/O will help anyway, just look at OZL :eek:
 
Companies may get cheaper but the price that the bidder will end up paying won't change too much.
It will have to be at least 30-50% premium on last price and probably close to 52weeks highs if they want shareholder approval.

A company can always bid and then walk away (or renegotiate if its a merger I think) if the price keeps dropping. At least decent management would do that

:2twocents
 
I think they will continue.

Just look at all the ones currently on the table...

BHP and RIO
PEM and CBH
OXR and ZFX only just completed
Xstrata and Lonmin
Xstrata LST and IRN
Cristal for BMX

The list goes on, it's not just in resources either.

Who did CSL just announce they were buying for $3b or something...
WBC and SGB is in th works..

If anything I think there might be more consolidation as those with good assets get gobbled up by the majors on this weakness.

OZL is a sitting duck at the moment IMO.
 
kennas said:
OZL is a sitting duck at the moment IMO.
Click to expand...

Apparently about 70 - 80% of their earnings will come from Cu yet they are getting sold down on the zinc factor.

I think my main point is that a lot of people in threads seem to be hoping for a takeover, whereas i think that alot of predators will hold off to see how low things will actually go before buying in.
 
prawn_86 said:
Apparently about 70 - 80% of their earnings will come from Cu yet they are getting sold down on the zinc factor.

I think my main point is that a lot of people in threads seem to be hoping for a takeover, whereas i think that alot of predators will hold off to see how low things will actually go before buying in.
Click to expand...
I agree, plus, if you're a stronger for longer believer, Zn will have another day in the sun in the coming years. Majors don't usually buy things for the short term but long term potential.

How about those idiots buying Rio's Kyntire U deposit in WA for $6 a lb? Long term vision there.
 
prawn_86 said:
Lately i have been seeing a lot of fundamentalists posting that "XYZ must be a t/o target soon". And i must admit i have also being guily of this myself. :eek:

However, in this current climate, i think it is unlikely for any/many takeovers to happen anytime soon, for the following reasons:

1. Whats to say some comapnies cant get cheaper? In current climate anything can happen, so why pay $1 now when it could be 80c in a months time. This is the whole "falling knife" thing, and the acquirers certainly dont want to pay too much.

2. Lack of credit/poor capital raising participations. A double edged sword for predators. Its now harder and more expensive to obtain debt, and capital raisings have low participation rates at the moment due to the economic climate.

3. Co's are too busy trying to maintain their own SP. The last thing they want to deal with is having to merge another company in with themselves.



Thoughts/comments...? :)
Click to expand...


Jmans comments in the MOL thread reminded me of this so thought i would bring it up again.

Seems i was fairly correct when i first posted it, as there has been very few noticeable t/o's, with the exception of a few CSG companies.
 
BEC - Property Trust

I believe they have several offers that they are considering at the moment

The results for this company have been very positive for last qtr - yet they still have finance to be re-negotiated.

Price has really been hammered, I would expect takeover to become public over next few mths
 
prawn_86 said:
Yes, but for takovers its on a much larger scale.

Its all well and good for us small investors to try and pick close to a bottom, but if you were buying the whole co then a few cents can makes millions of dollars difference.

Plus the fact that there is no guarantee the T/O will help anyway, just look at OZL :eek:
Click to expand...

That's true Prawn,

Takeovers aren't always the bees-knees. QGC an obvious exception here.

Obviously many smaller companies sp's have suffered because of the insurmountable difficulties faced atm in obtaining debt financing for project development. Even if they were to fall victim to a TO, then what? The immovable mountain still remains. I guess one strategy could be to acquire a small company with a starter project, spend money on constraining the resource to a higher degree of confidence, and then sell it off to someone else for more than you paid for it (aka CFE??)... but who has that kind of cash these days?

So it may currently be possible to get undeveloped projects on the cheap, but with many operations even stuggling to break even atm, it would be an unusual step imo for such a company to then increase its liability by acquiring another company with undeveloped resources. Remember also there are millions of dollars tied up in Environmental performance bonds etc that the holder is liable for.

I suppose the merging/joining together of two reasonably well established companies with similar synergies who are both looking to streamline their operations is a rather different proposition, eg. OXR and ZFX, which strikes me as rather different to an out-and-out resource grabbing exercise on the cheap.

The way the industry is going right now is rather alarming, I know of at least 6 geologists in nickel that have been sacked and another 2-3 in gold, all Exploration mind you. The toe-cutters are on the prowl, everyone is looking to get rid of unecessary staff and reduce expenditure.

jman
 
thanks Jman, always good to get an insiders perspective, but it just seems to confirm my thoughts.

sorry to those geos which have lost their jobs :(
 

Similar threads

R
The Financial Endgame
Replies
18
Views
9K
qldfrog
qldfrog
Top