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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.
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.