Following the takeover of Bradken Limited (ASX: BKN) by Hitachi Machinery and the impending bid for Spotless Group Holdings Ltd (ASX: SPO) by Downer EDI Limited (ASX: DOW), it appears that merger and acquisition (M&A) activity is hotting up in Australia.
It makes sense given companies are currently sitting on a record pile of cash following years of cost cutting measures and efficiency gains.
Accordingly, with the latest round of takeover talks circling this week for each of Ardent Leisure Group (ASX: AAD), Mantra Group Ltd (ASX: MTR) and Myer Holdings Ltd (ASX: MYR), I thought it was worth recapping why these three companies could each receive takeover offers soon.
Ardent Leisure Group (ASX: AAD)
Shares in Ardent Leisure jumped 10.5% on Tuesday as news that listed investment company Ariadne Australia Limited (ASX: ARA) had taken a 4.9% interest in the embattled theme parks operator.
Whilst market pundits believe Ariadne's stake in Ardent will not lead to a takeover offer (just yet), Ardent's dwindling share price is sure to make private equity firms come circling.
With Ardent's operational troubles stemming from low traffic numbers at its Dreamworld theme park on the Gold Coast, it is entirely possible that formerly interested private equity firms like KSL Capital Partners could make a tilt for Ardent in the wake of its low share price in order to take control of Ardent's crown jewel – its Main Event business in the U.S.
Mantra Group Ltd (ASX: MTR)
Mantra Group's shares have surged 15% this week following rumours that both Marriot International and the InterContinental Hotels Group may be interested in buying Australia's second largest accommodation provider.
The rumour mill went into overdrive after the hotelier's share price plunged to 52-week lows on the back of Mantra's half-year results reporting an underwhelming performance in the group's CBD properties portfolio.
With its shares well down from all-time highs of $5.26 per share, and the group continuing to report headline growth through acquisitions and new hotel openings, it is little wonder that the big players are starting to become interested in this capital light business. Watch this space.
Myer Holdings Ltd (ASX: MYR)
The share price of Myer rocketed 17% on Monday after it was revealed that billionaire rag-trader Solomon Lew acquired a 10.77% "blocking" stake in Australia's oldest department store through his listed Premier Investments Limited (ASX: PMV).
Although news of Premier Investments' investment in Myer was followed by denials from Mr Lew that a takeover offer would follow, industry experts believe the acquisition is of strategic value to Mr Lew's retail interests.
This is because analysts believe foreign retailers like Woolworths SA (the owner of David Jones) are running the ruler over Myer in the wake of the company posting its strongest first-half sales growth in six years.
Accordingly, whilst Myer continues to have its challenges ahead in the stagnant retail environment, I wouldn't be surprised to see an opportunistic bid for this department store chain soon.
Foolish takeaway
Investors must note that it is entirely possible that despite this week's ructions, no takeover offer could ultimately ensue for each of Ardent Leisure, Mantra and Myer.
As such, any investor looking to buy shares in Ardent Leisure, Mantra or Myer on the premise of a potential takeover must ask themselves one question – are these shares a long-term buy at current prices?
If the answer is yes based on the business fundamentals of each company, then it may be okay to buy shares in either company today. Alternatively, if you believe the underlying business is in all-sorts, then it's definitely not the time to buy any of these shares at current prices given most of the upside is largely priced in based on speculation.
