Credit Suisse say Challenger Ltd is a takeover target as Morgan Stanley downgrades its flagship product

Shares in investment management firm Challenger Ltd (ASX: CGF) were up slightly today to $11.57 as takeover rumours circle the company and Morgan Stanley books a downgrade of one of its products.

A March 18 report out of Credit Suisse has pitched Challenger as one of 31 likely takeover targets as part of a report on merger and acquisition prospects.

Takeover talks have circled Challenger for some time as the market for annuities products and retirement income streams gain popularity, with Japanese insurers the most likely contenders to be interested in the company.

Also in the news for Challenger is Morgan Stanley’s downgrade of long-term sales forecasts for Challengers Liquid Lifetime product this week – with a predicted cut of $200 million per year from the second-half of 2019.

Shareholders could benefit nicely from Challenger takeover offers, particularly if more than one punter throws its hat into the ring, but with a $76 billion investment portfolio, Challenger is susceptible to a significant valuation plunge if global market conditions falter.

One to watch closely as analysts certainly appear to have their eyes on this one.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. 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 Scott Phillips.

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