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BlueScope (ASX:BSL) share price on watch as takeover rumours swirl

asx share price movements represented by street signs stating mergers and acquisitions bluescope share price
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The market is expected to rise this morning but the BlueScope Steel Limited (ASX: BSL) share price could get an extra lift on takeover rumours.

There’s speculation that private equity groups are running the ruler over the global steel products manufacturer, reported the Australian Financial Review.

If a bid is lobbed, it could value the BlueScope share price at $25 a pop!

Why the BlueScope share price looks attractive to suitors

Buyout firms are reported attracted to the group due to expectations of a huge US stimulus boost and its exposure to infrastructure construction.

US house prices are zooming higher even as COVID‐19 is crippling its economy. A large cash injection to get people spending again could create a second tailwind for home construction.

That’s good news for BlueScope’s Colourbond division, but the good news doesn’t stop there. The group also serves the infrastructure sector and governments around the world are turning to such projects to get their economies moving again.

Attentive investors won’t have to be reminded that BlueScope only recently issued a profit upgrade.

What is the BlueScope share price really worth?

The question is whether these trends are worth $25 a share to would-be buyers of the BSL share price. This lofty figure may be based on a break-up value of BlueScope as the group is split along geographical markets.

The AFR also speculates that any bidder would need to offer up that amount to win over BlueScope shareholders. I am a shareholder and I know I will be throwing my hat into the ring at that price!

But don’t get overexcited. It’s still too early to say if the rumours have any legs, although it comes at a time when several high-profile ASX stocks are under the merger and acquisition (M&A) spotlight.

Recent ASX stocks under the M&A spotlight

Some examples of S&P/ASX 200 Index (Index:^AXJO) that have received a bid or are suspected of being pursued include the AMP Ltd (ASX: AMP) share price, Tabcorp Holdings Limited (ASX: TAB) share price and Coca-Cola Amatil Ltd (ASX: CCL) share price – just to name a few.

Nothing like a bit of FOMO to get the M&A ball rolling. Record low interest rates and the desperate hunt for growth is tempting cashed-up buyers to seek out targets before they miss out.

But treat M&A rumours with caution. There is always a reason why such news is leaked to the media.

BlueScope share price may also get divestment boost

On the other hand, even if the BlueScope takeover turns out to be hot air from a blast furnace, it may put the BSL share price in the “divestment basket”.

One bigger trend than the M&A theme is for ASX companies to sell or spin-off non-core assets. As I have explained before, divesting assets is a surer way of creating shareholder value than takeovers.

The takeover talk may put pressure on BSL to consider such a move in 2021, although its outperforming share price will give management breathing space.

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Motley Fool contributor Brendon Lau owns shares of AMP Limited and BlueScope Steel Limited. Connect with me on Twitter @brenlau.

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 Scott Phillips.

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