Up to the end of September, merger and acquisition (M&A) activity for ASX shares was at its lowest point for 17 years. Specifically, announced M&A transaction volumes for 2020 have been almost half the US$88 billion tally seen by 30 September last year, according to data published by Refinitiv.
For example, in February a takeover of National Storage REIT (ASX: NSR) for $1.9 billion was called off. Just as the $8.8 billion bid for Ampol Ltd (ASX: ALD), then Caltex, was shelved in April due to coronavirus.
Nonetheless, as predicted by the Refinitiv data, the fourth quarter has already seen a definite spike in takeover activity. In fact, there were 2 major bids for large cap ASX shares within 4 days of each other.
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Large Cap ASX Shares
Manufacturing and beverages
Last Monday, Coca-Cola Amatil Ltd (ASX: CCL) acknowledged takeover talks with Coca-Cola European Partners PLC (NYSE: CCEP). However, at least 3 major shareholders have expressed discontent with the offer, even though the board have unanimously supported it. Head of equities at Pendal Group Ltd (ASX: PDL), Crispin Murray has commented:
We don't feel like this is an offer that is compelling and we don't see a lot of downside if the deal fell over…It's a good time to bid when borders are shut and there are no tourists and earnings have been downgraded. The stock could have been trading around mid-$11 – now you're only looking at a 10% premium on this bid.
His views were reflected by other major shareholders such as investment managers Martin Currie Australia, and Antares Capital. Specifically, they believe the bid is opportunistic, because the ASX share price has fallen due to coronavirus. In addition, various analysts have been critical, citing the offer as a "fair, not full" valuation of the ASX share. Regardless, most agree it will likely get away in the new year.
Financial Services
Last week AMP Limited (ASX: AMP) announced ongoing talks with US private equity firm, Ares Management Corp Class A (NYSE: ARES). This is supposedly a $6.4 billion non-binding bid at this stage.
However, according to the Australian Financial Review (AFR) several large shareholders have questioned the logic behind the deal, believing a break up of the business is a better option. Simon Mawhinney, chief investment officer of shareholder Allan Gray didn't believe Ares Management wanted to own a bank, while Hamish Carlisle of Merlon Capital Partners, believes it would be a better option to break up the wealth manager. Meanwhile, the market is waiting to see if any other interested parties will declare their hand.
Future takeovers for ASX shares
Aside from moves by large foreign interests in the large cap arena, there is also something going on with investment funds. In particular, WAM Capital Limited (ASX: WAM) is executing 2 hostile takeovers of smaller funds.
However, of more immediate interest is another potential multi-billion dollar takeover in the S&P/ASX 200 Index (ASX: XJO). Back in September the AFR posted an article implying that the takeover of Ampol Ltd (ASX: ALD) may start again soon. Alimentation Couche-Tard Inc Class chief executive Brian Hannasch emphasised to investors in early September the "significant runway" it saw for M&A, with a focus on US and Asia. Moreover, the Canadian company has since poached Louise Warner, Ampol's former executive general manager for fuels and infrastructure.
