Corporate auctions heat up

There have been some very interesting corporate developments over the Easter break around corporate auctions. 

AstraZeneca, the UK’s second largest pharmaceutical company, received a takeover bid from US giant Pfizer, Newmont Mining and Barrick Gold are in talks for a ‘merger of equals’ as US medical company Allergan is under interest from investment activist William Ackman - a deal which is believed to be worth over US$50 billion.

The AstraZeneca deal is believed to be worth in the vicinity of £60 billion and would create the world’s largest medical company, which would comfortably inside the top ten largest companies in the world with an estimated market cap of £150 billion (AU$270 billion). This will be a deal to watch as it could be a major catalyst for more mega deals.

From an Australian-centric point of view, the possible Newmont-Barrick Gold merger will be keenly watched by gold bugs and gold play shareholders. The proposed deal sees Barrick offering Newmont shareholders a 13% premium to the previous 20-day average in an all-up scripted deal. However, there is talk that the deal is breaking down due to disagreements as to which Australian and New Zealand assets should be spun out. This could be an interesting situation for the likes of NCM, PRU, NST and RRL, which may see Merger and acquisition talk of their own.

NST is an interesting one as it has some of the cheapest production costs and best production lines on the ASX, though are these Newmont-Barrick assets appealing? The deal also puts NCM in the sight of predators. It is very cheap on metrics; its 12-month P/E is 6.7 times on a forward blending basis and it is trading at 15.7 times earnings. I don’t doubt there is still plenty of work to be done at NCM to lower costs and improve production, however there is enough tier-one assets at NCM for it not to be looked at.

Easter has also seen the best US rally of 2014, with five consecutive positive prints, which looks like carrying on to the open of the markets tonight. So far 18% of US companies have reported, 74% have beat estimates on the earnings line and seen quarterly growth of 3.6% and profit growth has been 1.4% which is 40 basis points ahead of expectations. All this bodes well for a further positive print.

Ahead of the Australian Open

The SPI futures have been closed since midnight on Thursday, so there is plenty of catch up to be done on the open considering the positive prints in the US and Japan over that time. There have also been some interesting individual moves.

Woolworths made a record all-time high and record-closing high on Thursday. It also registered its second highest volume trade of the year, double that of 30-day average on no news;  4.97 million shares were traded and option settlement is today, so more will go through.

Woodside Petroleum has closed at $40 for the first time since July 2011, as its production report came in ahead of expectations; this puts the Shell overhang as a real possibility. With the corporate actions from the weekend,  anything is possible here and Shell could either sell out on-market or to a new major holder.    

The six-year intraday high on April 10 of 5503.5 is firmly back in sight, with the market looking to add 0.6% on the 10am bell (AEST) to 5488. Volumes will be extremely thin as most traders in Australia will have taken extended leave for Easter and ANZAC day, which may see the buying overshoot this call and could see the ASX making a new six-year record.  

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.