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NRW (ASX:NWH) share price jumps as it moves closer to Primero acquisition

takeover M&A NRW takeover

The NRW Holdings Limited (ASX: NWH) share price is close to retesting its one-year high after declaring its bid for Primero Group Ltd (ASX: PGX) unconditional.

The NWH share price jumped 3.7% to $3.10 in late afternoon trade while the PGX share price added around the same amount to 60 cents a share.

NRW Holdings is trying to entice any Primero shareholders holding out from accepting the $100 million offer with accelerated payment terms.

NWH takeover of PGX fait accompli?

The bidder is promising to pay PGX shareholders within 10 days of valid acceptances and the share price of the target suggests that the takeover is all but a done deal.

NRW is offering 27.5 cents cash plus 0.106 of NRW shares in exchange for each PGX share. At the current NWH share price, this implies an offer price of 60 cents for the target.

If NRW gets 90% of PGX, it can compulsorily acquire PGX. Any target shareholders who do not tip their stock into the bidder’s hat before then will have to wait longer to receive their payment.

NRW share price growing via acquisitions

Some of Primero’s shareholders were holding out hope that NRW would increase its offer price. But the highly acquisitive NRW board held firm. The buyer recently bought BGC Contracting in December 2019 and parts of RCR Tomlinson’s businesses in January of that year.

The latest takeover will help NRW expand its capabilities across civil, mining, mining technology and drill and blast contracting.

There’s been a fair bit of mergers and acquisitions (M&As) in the mining services space recently. Both Downer EDI Limited (ASX: DOW) and Lendlease Group (ASX: LLC) have or are in the process of selling these businesses to other trade buyers.

What’s driving strong M&A activity

But M&A activity won’t be confined to this sector. Record low interest rates are one big factor behind the expected pick-up in takeovers.

Money has never been this cheap before and would-be acquirers should have a relatively easy time to raise needed funds.

Further, cashed up companies (and there are quite a few of them despite COVID-19) are looking to grow revenues and profit.

They will see acquisitions as a relatively quick way to achieve this goal. Just be conscious that most M&As actually leave shareholders of bidders worst off.

Other ASX stocks in the spotlight

But this won’t stop a flurry of activity in 2021. The Tabcorp Holdings Limited (ASX: TAH) share price is the latest to be touched by such speculation as it could divest its struggling wagering division.

Other ASX stocks in the M&A or divestment spotlight include the AMP Limited (ASX: AMP) share price and Suncorp Group Ltd (ASX: SUN) share price – just to name a few.

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Motley Fool contributor Brendon Lau owns shares of AMP Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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