ASX 200 up 1.1%: A2 Milk crashes, Crown-Star $12bn merger, Woolworths update

A2 Milk Company Ltd (ASX:A2M) and Crown Resorts Ltd (ASX:CWN) shares are making a splash on the ASX 200 on Monday…

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At lunch on Monday, the S&P/ASX 200 Index (ASX: XJO) has recovered from a soft start and is charging notably higher. The benchmark index is currently up 1.1% to 7,158.4 points.

Here’s what is happening on the market today:

A2 Milk crashes lower after downgrading its guidance

The  A2 Milk Company Ltd (ASX: A2M) share price has crashed to a multi-year low after downgrading its FY 2021 guidance once again. This downgrade was due largely to weakness in the daigou channel and significant inventory issues. The infant formula company now expects revenue of NZ$1.2 billion to NZ$1.25 billion for FY 2021 with an earnings before interest, depreciation and amortisation (EBITDA) margin of 11% to 12% (excluding MVM transaction costs). At the mid-point of its guidance range, this will be EBITDA of NZ$140 million, down 74.5% on FY 2020’s result.

Crown-Star merger

The Crown Resorts Ltd (ASX: CWN) share price is charging higher today after Star Entertainment Group Ltd (ASX: SGR) tabled a conditional, non-binding, indicative merger proposal. Although the offer is at a nil-premium share exchange ratio of 2.68 Star shares per Crown share, Star estimates that its pro forma share price is more than $5.00 per share. This implies a price in excess of $14.00 per Crown share, which was a 15.5% premium. Crown is considering the offer and also an improved bid from Blackstone.

Woolworths Endeavour demerger

The Woolworths Group Ltd (ASX: WOW) share price is pushing higher today after finalising plans to demerge its Endeavor Drinks business. If approved and implemented, the demerger will create two independent and leading ASX-listed companies. Woolworths also revealed that, subject to trading conditions and Board approval, $1.6 billion to $2 billion could be returned to shareholders if the demerger goes ahead.

Best and worst ASX 200 performers

The best performer on the ASX 200 today has been the Crown share price with an 8% gain. It is closely followed by the Star share price with an 7.5% gain following the merger proposal. The worst performer has been the a2 Milk share price with a disappointing 10% decline following its guidance downgrade.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia owns shares of Woolworths Limited. 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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