Home / Opinion / Three ASX stocks ripe for a takeover

Three ASX stocks ripe for a takeover


ASX shares have been popular acquisition targets in recent times.

Notable takeovers include Sydney Airport, Class Limited and Australian Pharmaceutical.

Here are three more ASX shares with takeover potential.

  • 1. Megaport Ltd (ASX: MP1)

    Megaport provides Network-as-a-Service services to companies.

    It’s similar to Amazon Web Services or Microsoft Azure, except it’s a neutral provider.

    The business expects to be cash flow breakeven by the middle of 2022 and is the only NaaS of notable scale in the market.

    Megaport doesn’t have many natural buyers, given its competitive edge is being able to integrate into any data centre or any cloud provider.

    But it’s a unique business model with a long runway of growth ahead.

    An IT distributor such as Cisco or VMware could be a natural acquirer and then use their extensive distribution teams to push Megaport’s products into bigger clients.

    It may also be a private equity target. Public markets usually find it difficult to value infrastructure like ASX shares with sticky customers and an organic growth profile.

    Sydney Airport, AusNet, and Spark New Zealand are all recent examples of this.

    2. Xero Limited (ASX: XRO)

    Similar to Altium Limited (ASX: ALU) – which has been a takeover target itself – Xero is a clear market leader in its software niche.

    It’s clearly won the Australian and New Zealand markets. But has so far failed to replicate that same success abroad.

    There’s every chance over time Xero is able to take market share abroad. But I’d argue that it’s more beneficial to an incumbent player and Xero to team up.

    UK-based Sage could be a natural acquirer given its struggle to retain market share.

    Intuit is the other logical suitor to create a duopoly with its dominant Quickbooks product in North America.

    3. Pointsbet Holdings Ltd (ASX: PBH)

    Of all the ASX shares listed as potential takeover targets, Pointsbet I think is the most likely candidate.

    The company doesn’t have an issue growing. But it can’t do it profitably.

    Subsequently, the share price is down 48% just in 2022 and 77% from its all-time high in 2021.

    Pointsbet has two strategic assets, which are attractive to acquirers: customers and partnerships.

    The business has 233,875 customers in Australia and 211,113 in North America.

    Pointsbet also has a 5-year exclusive marketing partnership with NBC Sports, which hosts the Olympics, NFL, NFL, English Premier League, and golf tournaments.

    Another reason for the takeover interest is that the online betting market, particularly in the US, is oversaturated.

    There are too many players making no money. Industry rationalisation is required.

    Therefore, I believe one of the large players like FanDuel or DraftKings could run the ruler over Pointsbet.

    Information warning: The information in this article was published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169

    Print Article

    Why bank analysts prefer this quality lender over the rest

    Morgans have released a summary of the key points from the recent bank reporting season. Of the banks that reported, Morgans says NAB was in line with consensus expectations, while ANZ and WBC beat consensus earnings expectations. Despite this, Morgans holds NAB as having the strongest 1H22 performance overall. NAB produced the strongest profit growth…

    Ishan Dan | 18th May 2022 | More
    Two of the most bullish bets on the ASX

    Markets around the world are still in freefall as losses mount as a result of investors moving out of risk partly due to inflation fears and supply chain disruptions partly due to the crisis in Ukraine and Covid lockdowns in China. The market is yet to become comfortable with the rate hike cycle that is…

    Ishan Dan | 18th May 2022 | More
    Top of the pops – top global funds had one thing in common

    March stands out as being one of the most difficult periods for investors in a generation. On the one hand, bond markets send fixed income to its worst return in more decades, and on the other, equity markets were sold off broadly on valuation concerns as bond yields ended a forty-year downward trend. It is…

    Drew Meredith | 18th May 2022 | More
    What does High Conviction mean?
    Ishan Dan | 10th Mar 2021 | More
    Inside CSL’s big end of year deal
    Lachlan Buur-Jensen | 15th Dec 2021 | More
    Battery materials in short supply but valuation is key
    Ishan Dan | 25th Mar 2022 | More
    Behind Brickworks’ (ASX:BKW) record profit
    Jaz Harrison | 25th Mar 2022 | More
    Is JB Hi-Fi the best retailer in Australia?
    Lachlan Buur-Jensen | 25th Mar 2022 | More
    Is the future still bright for Zip?
    Lachlan Buur-Jensen | 11th Mar 2022 | More