Our market could get a nice boost from takeover activities as the mega $33 billion deal to buy Westfield Corp Ltd (ASX: WFD) is likely to open the gates for other predators to pounce – and this won't be limited to the shopping centre sector.
I strongly suspect company boards have been quietly putting together a wish list of companies they would like to have a bite at but have been too afraid of a shareholder backlash to do more than that despite record low interest rates, improving business conditions and their relatively well filled coffers from years of cost cutting.
Investors have not been in the mood to entertain companies who aren't seen to be prudent with cash. Just look at our cashed-up miners BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO). Companies have been prioritising dividends and other capital return programs to address their over capitalised balance sheets.
While merger & acquisitions (M&A) activity wasn't in a hiatus in 2017, the deals had mostly been at the smaller end of the market.
But the acquisition of Westfield is now likely to prompt more risk-taking behaviour in boardrooms of large cap companies and I am expecting next year to be a pretty good year for big M&A. Guessing the targets though is the hard part, although that can be a pretty entertaining exercise.
It is never a good idea for retail investors to try to pick stocks just based on their takeover potential, but it is worth nothing if the stocks have been rumoured to be in the crosshair of a potential bidder.
The oil & gas space seems to be a good hunting ground with speculation that $10.5 billion market cap Santos Ltd (ASX: STO) is being courted by US-based Harbour Energy.
Let's not forget the bidding war that is also heating up for AWE Limited (ASX: AWE) either.
Then there is Oil Search Limited (ASX: OSH) as experts are starting to get excited about the development of its PNG LNG joint venture. The project looks lucrative enough for larger international rivals (including its JV partners) to at least mull a bid for the $11 billion company.
There is also lots happening in the industrials space with Tox Free Solutions Limited (ASX: TOX) about to be swallowed by Cleanaway Waste Management Ltd (ASX: CWY). There's plenty of room for bigger deals and I won't be surprised if someone is or will sniff around international logistics group Brambles Limited (ASX: BXB) with the stock down around 20% this year. I think the company has good strategic assets and is in pole position to benefit from the expected acceleration in US economic growth.
The retail space has also thrown up a few targets. The most talked about is embattled department store Myer Holdings Ltd (ASX: MYR), which has been verbally sparring with the chairman of Premier Investments Limited (ASX: PMV), Solomon Lew.
I won't be surprised to see some struggling companies also get swallowed up or consolidated. This may include food and beverage franchisor Retail Food Group Limited (ASX: RFG) and IVF-related companies such as Monash IVF Group Ltd (ASX: MVF).
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