An ASX takeover wave worth more than $22 billion is reshaping the Australian sharemarket, with foreign buyers and private equity circling some of the country’s best-known companies. In the space of a fortnight, waste giant Cleanaway agreed a deal with EQT, retirement specialist Challenger rejected a bid from Japan’s Daiichi Life, and property group Ingenia became the target of a bidding war that is still unfolding.
The deals are delivering windfalls for shareholders but raising fresh questions about the shrinking number of large listed companies on the ASX. Here is what has happened, what each bid involves and what to watch next.
What is driving the ASX takeover wave?
A flurry of activity on Monday 19 October gave the trend its headline number. According to an Australian Financial Review report republished by Wilson Asset Management, Daiichi Life’s approach for Challenger was the latest in a $22.4 billion wave of takeovers that will push companies off the ASX and into foreign ownership. On the same day, Cleanaway, plumbing supplies group Reliance Worldwide and novated leasing provider FleetPartners all reached milestones in longer-running sale processes.
FleetPartners was acquired by private equity firm Pacific Equity Partners, through its portfolio company SG Fleet, for $1.1 billion. Challenger and Cleanaway are among the ASX’s 100 biggest stocks, while Reliance Worldwide is in the ASX 200.
Cleanaway: EQT’s $9.3 billion deal
Swedish investor EQT has agreed to buy Melbourne-based Cleanaway Waste Management in a deal valuing the business at about $9.3 billion including debt, according to Private Equity Wire, citing Reuters. Shareholders will receive $3.095 per share in cash, a 32.1% premium to the closing price on 12 August, before the approach became public.
The board has unanimously recommended the transaction in the absence of a superior offer, and Cleanaway shares surged by almost 20% on the news. Shareholders may also receive pre-completion dividends of up to 19 cents a share, which would be deducted from the consideration.
Challenger: Daiichi Life’s bid rejected
Challenger received a non-binding proposal from TAL Daiichi Life Australia, which already holds about 20.4% of the company, offering $11.80 a share for the rest. Reuters reported that the offer valued Challenger at $7.94 billion, a premium of 19.8% to its previous close, and was subject to due diligence. Challenger shares jumped about 17% to their highest level since October 2018.
On Monday 26 October the board said the offer was not at a level it could recommend, but it intends to engage with Daiichi on a proposal it could support, according to Mingtiandi. Rejecting an opening bid is common in takeovers. Views on value differ: UBS has argued that Challenger is worth about $12.25 a share after strong annuity inflows, while Morningstar has said the offer is well above its own fair-value estimate. Challenger manages about $128 billion in assets, and a full takeover would give Daiichi control of a major provider of retirement income products.
Ingenia: a bidding war in progress
The most active contest is for Ingenia Communities Group. Capital Brief reported that Warburg Pincus lifted its proposal to $5.45 per security on Wednesday, up 10 cents, after Sydney developer AVID Property Group made an unsolicited bid of $5.35 on Monday.
Ingenia’s board has determined that the Warburg proposal could reasonably be expected to lead to a superior proposal. However, under its agreement with AVID, Ingenia must give AVID a chance to match the latest offer before it can deal with Warburg. The board has stressed there is no certainty any transaction will proceed.
Why the shrinking ASX is a concern
The wave has revived concerns about the shrinking number of large public companies and a lack of IPOs to replace them. The sharemarket has also been shaken by problems elsewhere: Nvidia-backed Firmus scrapped what would have been Australia’s second-largest IPO earlier this month, and data centre operator NextDC lost about $3 billion in market value after a profit warning, according to Mingtiandi. Fewer listings means fewer local companies for investors, including superannuation funds, to own.
What it means for investors
Takeovers typically pay a premium, which can be a windfall for shareholders, but they also remove a company from the market, leaving investors to find somewhere else to put the proceeds. Many Western Australians hold these stocks indirectly through super funds and exchange traded funds, so the changes can flow through to retirement balances. This article is general information only and is not financial advice. For the wider market picture, see how another big ASX name has been hit in our report on the Fortescue China iron ore standoff, or browse our business news.
What to watch next
- Ingenia: Whether AVID matches the Warburg bid, and whether either becomes a binding offer.
- Challenger: Whether Daiichi raises its price after the board’s rejection.
- Cleanaway: Shareholder and regulatory approvals before the deal completes.
- Foreign ownership: Any scrutiny from regulators as more ASX companies move into overseas hands.
- New listings: Whether the IPO market recovers enough to offset the companies leaving.
Frequently asked questions
Which ASX companies have received takeover offers?
Recent examples include Cleanaway (EQT), Challenger (Daiichi Life), Ingenia (Warburg Pincus and AVID), FleetPartners (Pacific Equity Partners) and Reliance Worldwide, which reached a milestone in its own sale process.
Why did Challenger reject the Daiichi Life offer?
The board said the $11.80 a share offer was not at a level it could recommend to shareholders, but it is open to talking about a higher proposal.
Do shareholders have to accept a takeover?
Not automatically. Deals usually need board support and shareholder or regulatory approval, and shareholders typically vote or decide whether to accept.
Image: Alexander-93 / Wikimedia Commons / CC BY-SA 4.0 (cropped and resized)
