6 asset-rich ASX 200 shares to buy for their takeover potential: expert

These half-dozen stocks have just the attributes that would have private equity licking their lips.

A man sitting at his dining table looks at his laptop and ponders the CSL balance sheet and the value of CSL shares today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Earlier this week, The Motley Fool reported Wilsons equities strategist Rob Crookston's seven ASX growth stocks to buy that could become takeover targets.

The idea behind that, according to the Wilsons team, is that acquisition bids are almost always favourable for the existing shareholders.

"Normally, companies are acquired at a significant premium to their latest share price," said Crookston in a memo to clients.

"Identifying companies that will make suitable takeover targets can make for very lucrative investments."

And the great thing for investors is that an actual transaction doesn't even have to materialise for their ASX shares to explode out of the gates.

"Any hint of a possible acquisition can trigger positive momentum even before a bid is announced."

'Infrastructure-like' ASX shares with free cash flow

One way to identify tempting takeover targets is to find companies that are asset-rich that have reliable incomes.

"We screened for infrastructure or 'infrastructure-like' stocks with low market betas, free cash flow yields (FY25) above 4% and companies that haven't seen a material re-rate over the last year."

Using these criteria, Crookston's team came up with six S&P/ASX 200 Index (ASX: XJO) shares that one could buy in anticipation of a takeover bid:

Crookston noted that Cleanaway and Lottery Corp both already feature in Wilsons' "focus portfolio".

"These look attractive acquisition targets due to their stable cash flows, relatively low debt balances and strong market positioning in their respective markets."

The Lottery Corporation also operates as a monopoly in every state except for Western Australia.

"Looks well priced versus other infrastructure-like assets."

Energy provider AGL was already the subject of a failed takeover attempt last year, as was Ramsay Health.

According to Crookston, the story might not be over for Ramsay.

"Cost out and real estate asset sales could be [an] opportunity for the right buyer. Earnings recovery after the pandemic could also be alluring."

Private ownership might actually help freight rail provider Aurizon operate better, read the Wilsons memo.

"Infrastructure asset, monopoly, relatively steady (high) cash flows. Might benefit from being taken private from an ESG perspective."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool Australia has recommended Aurizon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Mergers & Acquisitions

APM share price placed on ice as $1.8 billion deal goes dud

It's all question marks and raised eyebrows for shareholders of this ASX company today.

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
Mergers & Acquisitions

Could Star Entertainment shares be next in line to catch a takeover bid?

Star shares have been battered, but could a buyout be coming?

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

Man pointing at a blue rising share price graph.
Mergers & Acquisitions

Guess which ASX 300 stock is rocketing 10% on a $985 million cash bid!

Investors are piling into the ASX 300 stock on the back of a $985 million cash takeover bid.

Read more »

Shot of a scientist using a computer while conducting research in a laboratory.
Mergers & Acquisitions

Guess which ASX blue-chip share is throwing $202 million at another acquisition

This Aussie healthcare company is growing its presence in Switzerland.

Read more »

A man stands with his arms crossed in an X shape.
Mergers & Acquisitions

Boral share price falls after rejecting Seven Group takeover

The offer 'undervalues' Boral according to its committee.

Read more »

Miner looking at a tablet.
Materials Shares

Mineral Resources share price marching higher on new lithium project acquisition

ASX 200 investors are bidding up the Mineral Resources share price on Monday.

Read more »

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.
Technology Shares

Appen shares plunges 17% after takeover collapse

Well that didn't take long...

Read more »