Ten Network, Echo Entertainment in spotlight as deal market roars back to life
Paul Gilder Herald Sun May 24, 2014 12:00AM
TEN Network and casino group Echo Entertainment head a list of companies ripe for takeover, according to research by Australia’s biggest investment bank.
And the appetite for mergers and acquisitions is growing as business confidence recovers, the US economy improves and the number of bankruptcies slows, Macquarie Group says.
The outlook comes as separate research reveals the value of buyout deals involving Australian companies so far this year tips the scale at $US54.9 billion ($59.5 billion).
That tally, for proposed and completed acquisitions, is more than double the sum for the same period last year.
Macquarie analysts say Whitehaven Coal, explosives and chemicals makers Orica and Incitec Pivot, telco M2 Group and wealth manager IOOF also make the grade.
In a note for investors, they say takeover targets typically have low price-to-earnings ratios, high dividend yields, low gearing levels and are out of favour with investors.
The note comes at the end of a week of upheaval at Ten, which announced on Wednesday that it was axing breakfast show Wake Up and its early, morning and late news bulletins to cut costs.
About 150 jobs are expected to go in the restructure under chief Hamish McLennan.
Echo has also undergone a period of upheaval, albeit in the boardroom, ahead of a push by rival Crown Resorts into its key Sydney market.
At Whitehaven, weaker coal prices and continuing protests at its Maules Creek mine in northwestern New South Wales have taken a toll.
Analysts say companies are increasingly looking to make deals on the back of healthier balance sheets and a need to provide shareholders with more opportunities for growth.
CMC Markets chief strategist Michael McCarthy said the conservative approach to capital management in the wake of the financial crisis was gradually passing as appetite for risk improved around the globe.
“We’re comparing this year to a very weak period. There was a flurry of deals done in 2008, but since then it’s all been about repairing the balance sheet,” Mr McCarthy said.
