Every analyst worth his or her weight could see it…
When the dollar fell, and the Australian economy began to struggle; takeovers would make a comeback.
Overlay that with the 13% drop in the local sharemarket since April, and the stage is set for more takeovers from international buyers.
However, although they say good things come in threes, I must admit even I was a little surprised by some announcements on the market this morning.
Indeed, news of three takeovers hit the ASX feeds today (more on that below). It follows the takeover offer for insurance comparison site, iSelect Ltd (ASX: ISU), from Providence Equity Partners; and news out from the competition watchdog, the ACCC, that it may have some concerns on the proposed $8.9 billion takeover of rail operator Asciano Ltd (ASX: AIO) by the USA's Brookfield Infrastructure Partners.
Takeovers are back!
The private health insurer, NIB Holdings Limited (ASX: NHF), today announced its subsidiary, NIB New Zealand, has agreed to buy the medical insurance book of OnePath Life NZ for $22.6 million. OnePath is owned by Australia and New Zealand Banking Group (ASX: ANZ). Funded through existing capital, NIB says, "The transaction on completion will be immediately accretive to earnings per share" – excluding one-off costs of around $1.3 million.
Shares of professional services consultancy business, Coffey International Limited (ASX: COF), have fallen 84% in the past five years, but NASDAQ-listed Tetra Tech Inc. will make an off-market takeover offer for 100% of Coffey's shares at a huge 173% premium to the company's weighted average price over the past six months. Subject to a few normal conditions, shareholders stand to receive 42.5 cents per share in cash if the deal is successful – 130% higher than yesterday's closing price!
Finally, ALE Property Group, which can be found under the Google Finance name of Australian Leisure & Entrtmt Pty Mgt Ltd (ASX: LEP), has rebuffed an offer from Caledonia Investments — which already owns 25.84% of the company — to buy all shares at $3.95 apiece. Currently trading at $3.61, ALE's board believe the all-cash takeover would, "significantly undervalue ALE and accepting such an offer would not be in the best interests of ALE security holders."
Foolish takeaway
Some great investors have made some very respectable returns from takeover arbitrage – buying into a company with the expectation of a superior takeover offer – but for the ordinary investor, I'd advise against it. My advice is to buy shares in great companies at cheap prices. That way, even if your company doesn't get a takeover offer you'll still make a very respectable return on your investment.
