Currency boost to M&A tipped
The rate of foreign acquisitions of Australian companies is tipped to rise as a weak Australian dollar against the greenback and an under-performing share market combine to make Australian companies seem like tasty acquisitions.
That’s the call from The Australian [$], which leveraged data from Thomson Reuters Deals Intelligence pointing out that so far there had been $35.3 billion in foreign companies acquiring local ones, a figure which suggests we’re on track for the best year since 2011.
That year saw foreign raiders pick up locals to the tune of $55.78 billion.
According to the report, bankers have seen interest pick up in Australian companies in light of the currency drop-off which has seen the Australian dollar hit lows of 69c against the US dollar.
However, they said currency was only one part of the equation and served to sharpen intentions rather than inform them.
“Companies are not making major strategic decisions based on what the dollar is doing. But if the strategic decision has been taken, the exchange rate can be a factor,” the paper quoted co-head of Rothschild Australia Gareth Cope as saying.
The report adds weight to predictions buy a leading oil and gas analyst last week that the Cooper Basin was ripe for M&A action.
As reported on Finfeed, EnergyQuest chief executive Dr Graeme Bethune tipped M&A in the Cooper Basin on the back of a falling oil price and a sharp decline in the Australian dollar.
“The biggest falls have been for Cooper Basin players, averaging 70% and raising the likelihood of consolidation,” Dr Bethune said.
“This slump in share prices looks excessive.
“It is well ahead of the fall in oil prices of 42% in Australian dollars.”
He also noted that the east coast gas market was a standout domestic market in international terms, making it an attractive play for investors looking for a domestic oil and gas story.
However, the drop in the Australian dollar could have a flow-on effect for companies operating in Australia across all sectors.
It also has the effect of giving a boost to ASX-listed companies operating overseas while conducting sales in US dollars.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.