1. Infigen Energy (IFN) is currently a takeover target with IFN’s board recently recommending shareholders accept Iberdrola’s latest offer of $0.89 share. Closing Date of the offer is 30 July. IFN is however trading on the ASX at $0.92 per share. Does this suggest market believes there may be a further offer? What advice would you offer shareholders?
Infigen Energy (IFN) is one of the largest renewable energy generators in Australia. The Philippine owned UAC Energy launched a takeover offer at 80c per share in early June, which was then followed by an offer (with Infigen Board support) by the Spanish owned Iberdrola at 86c per share. UAC then declared its offer unconditional, and Iberdrola raised its offer to 89c.
Notwithstanding that the Infigen board is supporting Iberdrola’s bid of $0.89 per share, I would probably take no action as the other party (UAC Energy), who started the bidding war, owns a blocking stake (13.4% of the company). That’s why the shares are trading on the ASX at 92c – the market thinks that there is a chance of an improved bid.
Your downside is only 3 cents because if Iberdrola’s bid becomes unconditional and they look like succeeding, they will want to mop up all shareholders. One caveat to this – this is not like a normal company where you can press a number of levers to drive profitability – this is a utility company operating in a very regulated industry, so I wouldn’t necessarily be expecting another bid at that big a premium to the current offer.
2. On ABC radio and some other media in the morning, they talk about the ASX SPI futures being down 60 points or the futures market pointing to a loss of one percent when the ASX opens. Could you explain what this means?
In addition to the ASX for actual shares, there is a futures market. The main contract it trades is the ASX SPI or share price index. It is a cash settled contract based on the actual level of the S&P/ASX 200 index. It trades in calendar quarters and settles on the third Thursday of the quarter. So at the moment the market is trading a September contract, where open contracts will be cash settled based on the actual level of the S&P/ASX 200 on Thursday 17 September.
There are two trading sessions each day. The first matches and overlaps the ASX (trades from 9.50am to 4.30pm), and the second is an overnight session that runs from 5.10pm to 7.00am the next day.
Commentators in the morning are referring to the overnight session. So, if the SPI contract has lost 60 points between where it closed at 4.30pm the previous day and 7.00am that morning, there is a strong chance that the ASX will open around 60 points down. In the overnight session, you get institutions, brokers and other professionals trading. They are hedging positions and looking at Wall Street, commodity markets, actions by international fund managers and economic news.
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