Motley Fool Australia

5 multi-million dollar takeover targets


The falling Australian Dollar and strengthening of other major currencies has a knock on effect for a range of sectors from tourism to mining.

But with Australian assets now cheaper to overseas companies, and interest rates still at record lows, meaning that debt is easy to obtain and cash reserves aren’t earning acceptable interest, there are a range of stocks that could be of interest to foreign predators.

So which businesses could soon have potential buyers knocking on the door, and why?

Mortgage Choice Limited (ASX: MOC) is a prime candidate for a full takeover due to the presence of the Commonwealth Bank of Australia (ASX: CBA) on its register.

The nation’s largest bank owns around 16% of issued stock of this national mortgage broker. With growth harder to come by, Commonwealth may be tempted to internalise Mortgage Choice. Benefits could include cost savings through the increased synergies between the two brands, as well as the roughly 8% yield that Mortgage Choice offers. On the other hand, Commonwealth Bank could also be a willing seller to an overseas buyer, as divesting the stake would deliver a substantial cash windfall and allow it to redirect the funds towards more core operations.

Treasury Wine Estates Ltd (ASX: TWE) is not as cheap as it was a year ago, but it could still be a good takeover target. Factors in favour are the previous attractiveness of the business to a host of suitors, as well the well-established brand portfolio.

The portfolio of premium brands is one of the major attractions of Treasury to any purchaser, as the premium positioning of a label like Penfolds is difficult to replicate, which gives it substantial value.

Challenger Ltd (ASX: CGF) is a leading provider of annuity products to Australia’s burgeoning superannuation sector. Australian financial services firms are hugely attractive to overseas acquirers due to our high purchasing power as a nation and the stable nature of our economy, which underpins future cash flows.

Japanese and European financial services firms, in particular, struggling for growth options in their home markets would likely view Challenger as a high-quality business with majority market share, favourable industry dynamics and strong tailwinds behind it.

Graincorp Ltd (ASX: GNC) is a company that has previously been the target of a takeover attempt, with American giant Archer Daniels Midland (ADM) a prospective buyer in 2013.

At the time, Joe Hockey, as Federal Treasurer, denied the takeover as contrary to the national interest. However, the fact the company does not own monopoly assets, as well as a change in leadership in recent weeks at the Federal level fuelled speculation that ADM, which is still a substantial shareholder, could be poised to come knocking again.

Anatara Lifesciences Ltd (ASX: ANR) is tiny compared to the other stocks on this list, but may have just as much appeal to a global company as the others. The reason is that Anatara has a proven method of reducing mortality and weight loss in pigs through a therapy called Detach. The drug has been proven to greatly reduce the incidence of gastrointestinal diseases in field trials.

The point of difference for Detach is that it is a non-antibiotic treatment, with its active ingredient sourced from pineapples. This is crucial at a time when the World Health Organisation is calling for an urgent reduction in the use of antibiotics, as resistance to our strongest drugs grows and puts lives at risk.

The effectiveness of Detach has been proven in pigs and could extend to poultry, other livestock and even humans. It would not be a huge stretch to see a large global pharmaceutical company using a tiny part of its multi-billion dollar research and development budget to buy Anatara and its patents with a view to accelerating the research and development of the treatment.

If you are able to identify and buy a company that is an attractive takeover target, the financial rewards can be substantial. Any of the companies on this list are worthy of further research, however, Graincorp and Anatara look to be the most likely to have potential acquirers circling in the near future.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Ry Padarath owns shares of ANATARA LS FPO and Challenger Limited. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

Related Articles…

Latest posts by Motley Fool Staff (see all)