Takeovers | Tegel Jumps +36%, Healthscope +15%

27 April 2018

Global markets rallied overnight as investors once again shifted their attention back to strong corporate earnings in the US.
 
Facebook leapt higher in New York, after posting results that exceeded expectations and at least for the moment set aside concerns about the misuse of its users' private data. After the closing bell, Amazon also reported results and forecast second-quarter profit that topped analysts' forecasts, buoyed by swelling ranks of Prime subscribers and a profitable cloud-computing division that's winning more corporate customers. Once again, earnings will be key to supporting markets at the current juncture and so far they have not disappointed.   
 
Closer to home, two of the stocks under our research coverage in which we have seen value jumped yesterday on the back of takeover news. Healthscope (HSO:AX) was +15% higher and Tegel surged +36%, we discuss both stocks below.

Stock in Focus: Tegel (TGH:NZ / TGH:AX)
Tegel surged yesterday as Philippines-based poultry group Bounty Fresh Foods will mount a $437.8 million takeover bid for Tegel at $1.23 per share.

The Filippino company already has Tegel's cornerstone shareholder Affinity Equity Partners on board, signing a lock-up agreement with the holding company Claris Investments for a 45% stake. Bounty Fresh will pursue a full takeover when it formally lodges an offer, but will accept a 50% stake, the notice of intention document shows. Other conditions include securing Overseas Investment Office approval and for Tegel to meet certain earnings thresholds.

Tegel independent directors consider it too early to comment on the draft offer at this time. We are awaiting further news from the Board as to the merits of the takeover before potentially changing our recommendation on TGH.

We currently have a BUY recommendation on Tegel.

 
Australia & New Zealand Market Movers
The Australian share market was in negative territory on Thursday (ASX 200 index -0.18%) led by the major banks as the fallout from the royal commission hits the financial services industry. Westpac was the most heavily targeted of the major banks, after a major broker downgraded it following revelations from the banking commission that its lending controls were "ineffective."

In other news, shares in private hospital operator Healthscope jumped +15% after it received a $4.1bn takeover bid from a private equity consortium at $2.36 cash per share, a 16% premium on its Tuesday closing price. Any deal would be a return to private equity for Healthscope and the question is whether the Board of Directors will grant due diligence at the offer price as the offer was unsolicited.
 
The New Zealand market was more or less flat yesterday (NZX 50 index -0.08%) as Tegel surged on a planned takeover offer. In other news, an initial finding published by the Commerce Commission said it is concerned that Auckland Airport is planning to make excessive profits on its regulated assets, though the country's largest airport says it is optimistic it can convince the regulator that its plans to earn returns above a target benchmark will be successful. Auckland Airport is arguing its risk profile has changed as it enters an extended period of major new capital developments, which should allow it to earn a greater return.
 

3 Things Markets Will be Watching this Week

1.                 Corporate earnings season in the US will gather pace this week with about one-third of the S&P 500's members scheduled to report in the next five days.

2.                 Investors will continue to watch fallout from the Hayne royal commission into the financial sector in Australia.

3.                 The latest Australian inflation data is published on Tuesday.

 

Have a Great Day,

Team
 

Global markets rallied overnight as investors once again shifted their attention back to strong corporate earnings in the US.   Facebook leapt higher in New York, after posting results that exceeded expectations and at least for the moment set aside conce

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