7 top ASX takeover targets to buy in 2015

Get in quick before the next iiNet Limited (ASX:IIN) travels by!

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Takeovers are becoming easier and easier for Australian companies, with record-low interest rates at a time when organic earnings growth is hard to come by.

Investors need only look at the telecommunications space where the rapid share price rise of M2 Group Ltd (ASX: MTU) allowed the company to put in a competitive, but all scrip, offer for rival iiNet Limited (ASX: IIN) that initially outbid the cash offer from TPG Telecom Ltd (ASX: TPM). TPG’s revised offer now has an all-cash option which iiNet’s board has recommended due to its improved flexibility and certainty for shareholders.

Shares vs Debt

When a company’s share price is high (either on an absolute or price-to-earning basis), companies prefer to issue shares for acquisitions, as it reduces the dilution of existing shareholders and drives earnings per share growth.

Similarly, when a company can borrow money for the purchase at a low rate, shareholders are also rewarded by earnings per share growth, however this is weighed down by interest repayments.

With share prices at record highs for many top-quality companies, and interest rates at record lows, now is the perfect time for established players to look at purchasing smaller groups.

7 Top Takeover Stocks

Some of the most attractive companies on the ASX are currently facing either debt or revenue growth headwinds that could be overcome by being taken over by a larger player. Consider these 7 stocks:

Retailers finding it tough, like Myer Holdings Ltd (ASX: MYR), OrotonGroup Limited (ASX: ORL) and Kathmandu Holdings Ltd (ASX: KMD).

Struggling but profitable media companies STW Communications Group Ltd. (ASX: SGN) and Southern Cross Media Group Ltd (ASX: SXL), or even some of the more major oil and gas companies including Beach Energy Ltd (ASX: BPT) and Senex Energy Ltd (ASX: SXY).

When?

No one knows! However one would imagine that the best buying will be during the next correction.

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*Returns as of January 12th 2022

Motley Fool contributor Andrew Mudie has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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