Macquarie names 16 potential ASX takeover targets

The broker thinks these shares could be taken over in the near term.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • Macquarie's analysis identifies 11 standout ASX stocks as potential takeover targets, including Domino's Pizza Enterprises and Ramsay Health Care, reflecting a conducive market environment for M&A activity.
  • With the current market near its highs and credit spreads tight, Macquarie's takeover screen predicts attractive suitors for stocks like IPH Ltd and Sonic Healthcare, where valuations are notably below their 10-year averages.
  • The firm's historical success with its takeover screen, which previously saw significant M&A activity, suggests that at least some of these identified stocks might garner takeover interest within a year.

There has been a lot of mergers and acquisitions (M&A) activity in recent months.

This hasn't gone unnoticed by the team at Macquarie Group Ltd (ASX: MQG).

So much so, the broker has run its takeover screen to see if there are any takeover candidates in the current market.

Macquarie points out that after re-running its takeover screen from five years ago, it found that 46% of the 37 stocks it identified had some form of M&A. It feels that this gives its screening process some merit. It explains:

With the offer for AUB plus media reports of PE interest in DMP, we have re-run our takeover screen from 2020. Looking back at the original, there were 37 stocks on the list and 46% had some sort of M&A (9 completed takeovers, 6 failed or pending, and 2 strategic stakes acquired), so the screen has merit. In our view, we are in an environment conducive to deals as the market is near its highs, credit spreads are tight and confidence in the outlook is improving. Our FOMO Meter is back up to +0.98, marking the strength of equity sentiment.

a woman drawing image on wall of big fish about to eat a small fish

Image source: Getty Images

Which ASX stocks could be takeover targets?

According to the note, Macquarie has identified 16 ASX stocks that it believes could be attractive options for private equity and other suitors.

And from these, there are 11 ASX stocks in particular that standout.

These are pizza chain operator Domino's Pizza Enterprises Ltd (ASX: DMP), pharmaceutical products distributor EBOS Group Ltd (ASX: EBO), Dan Murphy's owner Endeavour Group Ltd (ASX: EDV), language testing company IDP Education Ltd (ASX: IEL), poultry producer Inghams Group Ltd (ASX: ING), intellectual property services provider IPH Ltd (ASX: IPH), packaging company Orora Ltd (ASX: ORA), Smiggle owner Premier Investments Ltd (ASX: PMV), hospital operator Ramsay Health Care Ltd (ASX: RHC), plumping parts company Reliance Worldwide Corporation Ltd (ASX: RWC), and healthcare company Sonic Healthcare Ltd (ASX: SHL).

Other candidates are Australian Clinical Labs Ltd (ASX: ACL), James Hardie Industries plc (ASX: JHX), Reece Ltd (ASX: REH), Spark New Zealand Ltd (ASX: SPK), and Viva Energy Group Ltd (ASX: VEA).

Commenting on the stocks, the broker said:

The result is 16 stocks. Of these, the forward PE is >1 standard deviation below the 10-year average for 11 stocks. Ranked by how far they are below their highs, they are IEL, DMP, IPH, RHC, PMV, EDV, ING, ORA, EBO, SHL and RWC. Two (RHC, ORA) already had failed takeover offers in recent years, while others have been the subject of takeover speculation. Based on the performance of the takeover screen from 2020, we would be surprised if none of the stocks on the list is the subject of takeover interest in the next year.

Motley Fool contributor James Mickleboro has positions in Domino's Pizza Enterprises and Endeavour Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Domino's Pizza Enterprises and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Domino's Pizza Enterprises, IPH Ltd , Orora, Premier Investments, and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

A man using a phone shouts and puts his hand out in a stop motion indicating the Yancoal trading halt today
Capital Raising

Magellan requests trading halt ahead of major announcement

Magellan enters a trading halt ahead of a proposed merger and capital raising.

Read more »

Ecstatic man giving a fist pump in an office hallway.
Mergers & Acquisitions

Pepper Money shares pop 25%, Challenger slips 3% on take-private deal

The offer represents a meaningful premium to where the stock had been trading prior to the speculation.

Read more »

A man looking at his laptop and thinking.
Materials Shares

Rio Tinto shares charge higher after Glencore merger collapses

The parties couldn't come to an agreement.

Read more »

Man sitting in a plane looking through a window and working on a laptop.
Mergers & Acquisitions

Qantas shares higher on Jetstar Japan sale

The Flying Kangaroo is saying sayonara to one of its brands.

Read more »

A man has a surprised and relieved expression on his face.
Mergers & Acquisitions

ASX tech stock rockets 50% on Aura takeover deal

Let's see what is getting investors excited on Tuesday.

Read more »

Engineer looking at mining trucks at a mine site.
Mergers & Acquisitions

Why the $260 billion Glencore merger is a 'high-stakes gamble' for Rio Tinto shares

Rio Tinto has until 5 February to clarify its $260 billion merger intentions with Glencore.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Mergers & Acquisitions

Rio Tinto shares sink 6% on Glencore merger bombshell

The market is reacting negatively to this potential mega-merger.

Read more »

A man stands with his arms crossed in an X shape.
Mergers & Acquisitions

BlueScope shares fall after rejecting 'significantly undervalued' takeover offer

The steel products company has given a firm no.

Read more »