'Very saleable': The beaten-up ASX 200 stock that could be a takeover target

Is this stock driving towards a takeover?

| More on:
Woman sits at her desk working at night, while traffic flows on a busy freeway out the window behind her.

Image source: Getty Images

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

The S&P/ASX 200 Index (ASX: XJO) stock Transurban Group (ASX: TCL) has largely been travelling sideways since the onset of COVID-19, as shown on the chart below. According to some experts, this weak valuation could make the business an acquisition opportunity.

Created with Highcharts 11.4.3Transurban Group PriceZoom1M3M6MYTD1Y5Y10YALL1 Jan 20205 Feb 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '252020202020212021202220222023202320242024www.fool.com.au

Transurban is a major toll road business with roads in Sydney, Melbourne, Brisbane and North America.

It has been one of the ASX 200 stocks that has struggled through high interest rates. Not only has this increased the cost of debt (impacting profitability, cash flow, and distribution), but it has also hurt Transurban's market value.

Experts call the ASX 200 stock a tempting target

According to the Australian Financial Review, Ray David, a portfolio manager at Blackwattle Investment Partners, thinks Transurban shares could appeal to superannuation funds because the toll roads have long-term contracts that enable them to continue increasing toll prices even if the economy is weak.

It was noted that many of Transurban's toll contracts in Australia allow the business to increase its fares by 4% or the rate of inflation. David said:

Their roads are typically local monopolies…pretty much there's no competition. Toll roads are also defensive assets, with non-cyclical characteristics, which are getting more expensive to replace.

Private sector partners such as Transurban offer both governments and super funds the expertise required for crucial infrastructure development which has failed to keep pace with population growth.

David, whose fund currently holds Transurban shares, isn't the only expert who believes the ASX 200 stock could be an appealing target for large investors seeking defensive earnings.

According to the AFR, Sarah Shaw, chief investment officer at 4D Infrastructure, said:

It remains an incredibly attractive pool of assets for someone that wants a long term, resilient earnings stream. People will pay for a premium for that.

Shaw also noted that if Transurban were not a listed business, the negotiations with NSW and other governments would be "less noisy" as it wouldn't need to report to public shareholders.

Transurban share price snapshot

The ASX 200 stock has declined approximately 2% since the start of 2025. Time will tell whether this valuation is tempting enough for a takeover bid.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Industrials Shares

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Industrials Shares

Key takeaways from ALS shares results according to Macquarie

ALS announced an underlying net profit after tax (NPAT) of $312 million this week.

Read more »

A woman sits crossed legged on seats at an airport holding her ticket and smiling.
Industrials Shares

What does Macquarie think Auckland International Airport shares are worth?

Is it time to invest in this unique holding?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Industrials Shares

Guess which ASX 200 share is down 8% on earnings miss

Why are investors selling this stock? Let's dig deeper into things.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices.
Broker Notes

Macquarie tips 20% upside for this ASX 200 industrials stock

Let's see what the broker is saying about this stock following an update.

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Industrials Shares

Guess which ASX 200 stock is crashing 24% on results day

Investors were not impressed with this result. But why?

Read more »

A man looking at his laptop and thinking.
Industrials Shares

Which ASX 200 industrials stock does Macquarie expect to sink 40% over the next 12 months?

Can this name build it's way out of such negative sentiment?

Read more »

Shocked office worker staring at computer screen with colleagues working in the background.
Industrials Shares

ASX 300 stock falls on shock founder CEO exit

A change of leadership has been announced.

Read more »

Male and female workers at a steel factory.
Industrials Shares

4 reasons this $10 billion ASX 200 stock can keep charging higher into 2026

A leading expert forecasts ongoing earnings growth for this top ASX 200 stock.

Read more »