Asaleo Care (ASX:AHY) share price shoots 22% higher following takeover bid

The Asaleo Care Ltd (ASX: AHY) share price has had a wild day, spiking more than 20% before being placed in a trading halt. Here's why…

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published December 10, 2020 2:41 pm AEDT

The Asaleo Care Ltd (ASX: AHY) share price was on fire this morning, rising 21.78% to $1.23 before being placed in a trading halt. Asaleo shares opened at $1.01 this morning and stayed pretty much at that level until just past 11:00 am.

Then, they shot the moon and rapidly climbed as high as $1.24. At 11:31 am, Asaleo released an announcement to the markets which informed investors that trading would be "temporarily paused pending a further announcement".

At 12:32 pm, the ASX issued another announcement advising the markets the shares would be "placed in a trading halt at the request of AHY [Asaleo Care], pending it releasing an announcement." We have not yet received this announcement directly from Asaleo.

So what's going on here with Asaleo Care? This company is a large manufacturer of personal paper products. It owns well-known household brands like Libra, Sorbent, Handee and Purex.

toilet paper asx share price represented by man clutching rolls of toilet paper close to his chest — Image source: Getty Images

What's driving the Asaleo Care share price?

Well, the recent run of ASX takeovers looks set to add another chapter to its story today. Asaleo is reportedly the latest ASX company to be subject to a takeover offer. This follows in the footsteps of other recent targets such as Coca-Cola Amatil Ltd (ASX: CCL).

According to reporting in the Australian Financial Review (AFR) today, Asaleo's board has "called in defence adviser Luminis Partners to assess and handle potential interest in the company". The AFR asserts that "it is understood there's an indicative proposal on the table at $1.26 a share, which would be a 24 per cent premium to Asaleo's last traded price".

The suitor? According to the report, it is "believed to be" an existing major shareholder in Asaleo – Essity Group. Essity is a large Swedish company, and already reportedly has a 36.2% stake in Asaleo.

However, the report also states that "market sources reckon that's unlikely to be enough to win over Asaleo's board and shareholders".

Even so, the two companies are apparently already rather intertwined, especially if we consider the large stake that Essity already has in Asaleo. The AFR tells us that Essity already licenses several brands to Asaleo, including 'Tork' and 'Tena' until 2027. These two brands alone reportedly made up "the majority" of Asaleo's earnings last financial year.

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