In the AFR today, Macquarie has named 10 stocks which they think could be take over targets as M&A activity ramps up over the next 12 months:
Read the story here: https://www.afr.com/markets/equity-markets/the-11-asx-stocks-that-macquarie-says-are-primed-for-a-takeover-20251103-p5n7bx
“Takeover activity looks to be ramping up on the ASX, thanks to a $5.2 billion private equity bid for insurer AUB Group and reports that Bain Capital is potentially eyeing off Domino’s Pizza.
Macquarie says there could be another dozen potential targets on the local boards. At the top of the list is international education services provider IDP Education, which remains one of the most heavily shorted stocks on the ASX, after plunging in value in the past year.
No. 2 on the list was Domino’s Pizza, which surged nearly 20 per cent at one point last week after The Australian Financial Review’s Street Talk column revealed that Bain Capital was considering making an offer for the fast food chain.
The stock finished the day up 7.2 per cent to $16.56 when it resumed trading after the company told the ASX that it had received no takeover offer. It was trading for more than $18.30 on Monday afternoon, suggesting that investors are still hoping for a deal. Similar to IDP Education, Domino’s shares have fallen nearly 50 per cent over the past 12 months.
Others on Macquarie’s list of takeover targets include patent and trademark firm IPH, hospitals group Ramsay Health Care, Solly Lew’s Premier Investments, hospitality giant Endeavour, chicken processor Ingham’s, diagnostics titan Sonic Healthcare, cans and glass bottle maker Orora, and plumbing supplies maker Reliance Worldwide.
“We look for stocks well off their highs with a history of profitability, but currently under-earning. It helps if they’re cheap,” Macquarie strategist Matthew Brooks wrote in a note to clients published on Monday.
Brooks has screened for companies on the S&P/ASX 300 Index that are trading at least 30 per cent off their three-year high (IDP is down 83 per cent, Domino’s 76 per cent, and IPH 64 per cent), and have a history of profitability despite recent depressed earnings.
He’s also limited to companies with $20 billion in enterprise value or below – otherwise the list would also include blood plasma giant CSL and packaging group Amcor.
The bank has some form in this department – nearly half of the 37 stocks that were featured in a similar report published in 2020 have been the subject of some form of M&A activity. Nine completed takeovers, six failed or pending, and two strategic stakes were acquired.
This comes after AUB last week confirmed it had conducted high-level talks with Swedish private equity firm EQT Group on a potential takeover of the $3.8 billion retail and wholesale insurance broker and underwriter.
“We would be surprised if none of the stocks on the list is the subject of takeover interest in the next year,” Brooks said in his note.
“We are in an environment conducive to deals as the market is near its highs, credit spreads are tight and confidence in the outlook is improving.”
-ENDS-