Merger and acquisition activity has picked up in recent weeks and cashed up private equity firms are at least partly responsible.
A case in point is e-commerce solutions specialist SLI Systems, which this week received a takeover notice from Texas-based private equity firm ESW Holdings at 63 cents a share, valuing the company at $40m.
With just over half the stock tied up already, the ESW takeover looks like a done deal.
NZ Funds senior portfolio manager Josh Wilson said the recent flurry of merger and acquisition activity could be partly due to the falling NZ dollar, which reduces the "sticker" price for overseas acquirers.
"On the other hand it might be as simple a reason as dealmakers wanting to get things done and dusted before the Christmas rush, when things tend to go on hold for a couple of months," he said.
Unfortunately, it means leakage of another company from the NZX board. Contrasting the offers for the high-flying Restaurant Brands with struggling Steel & Tube and SLI Systems shows there is no easy formula to picking takeover targets, Wilson said.
"The recent pullback in the market may be enough to draw a couple more offers out of the woodwork before the end of the year," he said.
"New Zealand's listed companies generally tend to generate strong cash flows, which is always attractive to potential acquirers, particularly private equity."
Good deal for some
SLI's takeover is a good deal for recent shareholders, but not so much for those who were in on the 2013 initial public offer at $1.50 a share.
Pie Funds (8.75 per cent) and Milford (7.8 per cent) picked up their stakes from ANZ Private Equity and Pioneer Capital at 25c a share in March.
At the ESW's offer price of 63 cents, Pie Funds and Milford are looking at a 152 per cent return on their investment in just over six months.
Pie Funds' head of research and portfolio manager Mark Devcich said the SLI takeover was typical of this stage of the investment cycle.
"This normally happens late in the cycle, when you get corporate activity, and given that interest rates are low. Private equity has raised a lot of money globally and they are looking at acquisitions because they need to deploy funds," he said.
"There has been a lot of money that's been raised on the sidelines and that is now looking for a home. Some companies that are underperforming have become targets for these private equity companies — SLI is one of them," he said.
More to come?
And it looks like some Tourism Holdings assets are up for sale.
The company said it was in discussions regarding the Kiwi Experience business and some of the Discover Waitomo businesses, including Black Water Rafting, Ruakuri and the Waitomo Homestead.
The Waitomo Glow Worm Caves business is not on its "for sale" list.
The discussions are incomplete and, if they progress to a definitive transaction, THL is expected to be able to provide more information during November or December.
Successful divestment of these assets will allow THL to focus on its core business — campervan rentals.
Agricultural services firm Wrightson will be a mere shadow of its former self if the sale of its grain and seed division to Denmark's DLF goes ahead, and the New Zealand Shareholders Association is not happy about it.
On the surface, the offer looks quite attractive, the association said.
"The problem is that while accepting there will be a short-term benefit in the form of a very reasonable pay out, this will leave PGW less than half its current size and with a range of businesses widely considered to be inferior to the Grain and Seed division.
"We can assume the PGW board considered a range of options, but it seems likely that the difficult position of the majority shareholder has had a major impact. An obvious option would be for PGW to raise capital via a rights issue and grow the business organically, rather than divesting its most profitable part."
The association will vote against the $434 million sale at next week's special and annual meeting.