2 ASX 200 infrastructure shares ‘ripe for takeout’: expert

Let’s take a closer look.

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Key points

  • ASX listed infrastructure shares are attractive merger and acquisition targets, particularly in this high inflation and volatile environment 
  • APA Group and Transurban could be next to be taken over, according to 4D Infrastructure 
  • These assets are prized for their defensive earnings and inflation hedge and the ASX could soon be left without any shares in this sector 

The painful market sell-off could play into the hands of would-be bidders with an expert pointing to two ASX 200 infrastructure shares likely to be in play.

Sarah Shaw from 4D Infrastructure thinks the APA Group (ASX: APA) share price and Transurban Group (ASX: TCL) share price make enticing targets amid the current volatility, reported the Australian Financial Review.

Why ASX 200 infrastructure shares make good M&A targets

Infrastructure shares are hotly sort after. They not only provide more stable earnings in an uncertain world, but they also provide an inflation hedge.

Shaw explained:

I really think we’ll have very, very little left in Australia in a couple of years, I wouldn’t take Transurban off the table, clearly APA – I think they are ripe for takeout.

It is easy to come in and take something out where there is no government shareholder or blocking shareholder … anything that does have an open registry is open game.”

ASX 200 infrastructure shares are an endangered species

As it stands, we don’t have many listed infrastructure shares left on the S&P/ASX 200 Index (ASX: XJO).

In the past five years, there has been $154 billion of Australian infrastructure changing hands. That’s according to the AFR quoting Dealogic data.

These include Sydney Airport, AusNet Services, Spark Infrastructure, Tilt Renewables and Infigen Energy.

ASX telecom shares like Vocus Group and TPG Telecom have also been targeted. Bidders are hungry for assets that generate relatively reliable and consistent returns.

The next takeover bid in the sector

There are only three listed infrastructure shares left on the ASX. Besides gas pipline operator APA and toll road owner Transurban, there is the Atlas Arteria Group (ASX: ALX) share price.

But Atlas Arteria’s days on the ASX could be numbered. IFM Investors bought a 15% stake in it this month. The global investor said it was mulling a full $7.8 million takeover bid for the toll road operator.

Barbarians at the gate

One might not think it, but Australia has an open border approach when it comes to foreign ownership of our infrastructure assets. This makes it easy for local and international bidders to acquire our port, rail, road and power assets.

The high volatility in our market could make it easier for takeovers to occur too. Not only are share prices in general under pressure, making assets cheaper to buy, but risk wary shareholders could be more inclined to sell.

There is certainly no shortage of firepower from bidders either. The AFR reported that there was US$304 billion in capital hunting for infrastructure assets at the end of 2021. That’s double the amount from five years ago, according to data group Preqin.

The Transurban share price has fallen around 5% over the past year, while the APA share price has gained 19%.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended APA Group. 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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