Unsolicited Bids Hit a Record in Australia as Bargain-Hunting Abounds
(Bloomberg) -- Executives in Australia and New Zealand are getting more surprise takeover proposals than ever as suitors spot bargain hunting opportunities in pandemic-depressed valuations.
The final quarter of 2020 is set to mark the highest number of hostile and unsolicited bids for public companies in the region on record, with 12 new approaches announced, data compiled by Bloomberg show. By value at A$26.5 billion ($20 billion), that’s the most in any quarter since the third quarter of 2015 when nearly A$29 billion in offers landed.
The surge in surprise suitors shows how even as Australia’s benchmark S&P/ASX 200 Index of equities wiped out its year-to-date loss this month, would-be buyers see bargains persist in pockets of the market, setting up a potential spree of public takeovers in 2021.
“While the overall market is just above where it was at the start of the year, there’s still some companies or sub-sectors that continue to trade materially below their share prices from the start of the year,” Emma-Jane Newton, Sydney-based managing director and head of general industrials investment banking at Morgan Stanley, said in a phone interview. “There is a lot of searching going on.”
The momentum of unsolicited bids continued in December. AustralianSuper, the nation’s largest pension fund, made a NZ$5.4 billion ($3.8 billion) takeover offer for New Zealand infrastructure investor Infratil Ltd.. The bid, which had a 28% premium to Infratil’s last closing price before the announcement, was rejected.
Australian fund services provider Link Administration Holdings Ltd. received a proposal from U.S. tech firm SS&C Technologies Holdings Inc. after getting an earlier offer from a consortium including Carlyle Group Inc. and Pacific Equity Partners. Both proposals were shot down as inadequate.
The uptick of uninvited offers also comes along with a recovery of dealmaking activities in Australia and New Zealand. About $42 billion worth of deals for public companies were proposed or announced in the last three months of 2020, the busiest since the fourth quarter in 2017.
Australia’s stock market recovery lagged global peers this year as the cyclical-heavy index was outshone by others like the U.S, where major technology firms that were a popular pandemic-haven helped drive a swift rebound to all-time highs.
Hopeful acquirers could still be worried their targets would only get more expensive as the economy continues to recover, said Nick Sims, co-head of corporate advisory in Australia and New Zealand for Goldman Sachs Group Inc.
“Bidders may believe it’s more important to get in first and put a marker down as to where they think valuation lies and let the debate hinge around that first number,” Sims said in a phone interview.
Nevertheless, Australia is less prone to truly hostile takeover campaigns because of higher thresholds. Under a board-approved arrangement, a bidder needs at least 75% of shareholder votes to get a deal done, while in a compulsory acquisition, the bidder needs 90% of shares to force holdouts to submit to a deal.
Bidders will still “need to act with an element of speed,” Morgan Stanley’s Newton said, while the companies being sought will have their own challenges.
“Boards will also have an interesting and difficult set of circumstances to think about as they weigh how quickly their businesses are recovering and where fundamental value lies,” she said.
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