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Private equity is circling around defensive ASX 200 stocks: Brambles rallies on takeover talks

Mon 16 May 22, 12:49pm (AEST)
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Key Points

  • CVC Capital Partners is said to have a +$20bn offer to buy out Brambles
  • Brambles has upgraded its FY22 earnings twice this year as it passes on higher prices to customers
  • Several big ASX-listed names have been picked off by private equity in the last 12 months

Brambles (ASX: BXB) is yet another defensive name that might fall under the helm of private equity.

According to the Australian Financial Review, CVC Capital Partners has been talking about an offer which values Brambles at more than $20bn, including debt.

Brambles confirmed its preliminary engagement with CVC on Monday. Though, everything remains up in the air. 

Interestingly, Brambles rallied 6.2% on February 15 after responding to media speculation that it is not in discussions with, nor has been approached by any third parties. 

Pricing power

Brambles has upgraded its FY22 earnings two times this year, being able to pass on higher prices to customers without much pushback.

2022-05-16 12 19 16-pdf
Source: Brambles half-year FY22 results presentation

The latest upgrade included:

  • Revenue growth of 8-9% (previous guidance of 6-8%)

  • Underlying profit growth of 6-7% (previous guidance of 3-5%)

  • Free cash flow after dividends to be a net outflow of US$300-350 (previous guidance of US$350m)

Brambles, which has been a traditionally slow moving and underperforming stock, is now up 7.6% year-to-date versus the ASX 200, which is down -6.6%.

Private equity gets defensive

In the new era of rapidly increasing interest rates and quantitative tightening, private equity has taken a turn from tech and growth investments to more defensive plays.

Notable takeovers (and takeover offers) in the past 12 months include:

  • April 2022: Ramsay Healthcare

  • December 2021: Spark Infrastructure

  • September 2021: Ausnet Services

  • July 2021: Sydney Airport

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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