Who’s next? Divorcing the ASX can bring hidden payday

afr.com:

The torrent of privatisation offers, private equity bids and delistings from the ASX are set to gather pace, says one fund manager, with companies with low levels of liquidity in their shares among the prime candidates.

Some of the bids, such as Rich Lister Raphael Geminder’s bid to buy out the remaining 50 per cent of struggling packaging company Pact Group, offered only a tiny premium. But investors should be on high alert for other unloved companies such as health group Healthia. Private equity firm Pacific Equity Partners two weeks ago made a $260 million bid at $1.80 a share, an unusually large 85 per cent premium to Healthia’s last close before the offer. The group, which runs a network of optometry, podiatry and physiotherapy clinics, had been in the doghouse for much of 2023, falling 33 per cent from late January before the bid.

Wilson Asset Management portfolio manager Oscar Oberg said there were likely to be more buyouts, privatisations and delistings as the sharemarket adjusted further after what had been a “crazy period” of the pandemic, ultra-low interest rates and then soaring inflation and a spike in rates. He emphasised there was no foolproof, one-size-fits-all approach, but falling daily turnover in shares was one signpost to look for.

Wilson Asset Management portfolio manager Oscar Oberg. 

“I think we will see more of this,” Mr Oberg said.

He said companies where liquidity in a stock had shrunk had found the going very difficult.

“Any company that doesn’t have liquidity has really struggled over the past two years,” he said. Small and micro-cap stocks in particular were being overlooked by investors. “Those stocks will never re-rate to a proper value,” he said. This made them more likely to be picked