BUZZ - Citi maintains "Buy" rating on Challenger, says Dai-ichi Life Insurance may raise acquisition offer

Latest Developments

October 19 - ** Citi maintains a "Buy" rating on Australia's Challenger (CGF.AX) and raises its price target to AUD 13.20

** The broker stated that Dai-ichi Life's acquisition offer of AUD 11.80 per share is unlikely to secure board approval at the current price level and negotiations to raise the offer price are expected

** Dai-ichi Life's offer values the investment management company at AUD 7.94 billion (link) (USD 5.54 billion)

** Citi noted that recent M&A deals in the financial services industry are at an average premium of about 40% above the one-month volume-weighted average price (VWAP), while Dai-ichi Life's current offer premium is below this level

** “The offer definitely needs to be raised, but the prospect for a deal still looks upbeat,” — Citi

** Challenger maintains its guidance for core basic EPS of 45 to 49 Australian cents for FY2027, and raised its FY2027(E) core EPS forecast by 1%, and its FY2028(E) and FY2029(E) forecasts by 0.3%

** Jefferies stated: “The 17.7% control premium is at the low end compared to historic premium levels for Japanese insurers”

** “In short, we expect negotiations will lead to a higher offer,” — Jefferies

** As of the previous trading session close, the stock had recorded a year-to-date gain of over 25%

(1 USD = 1.4327 AUD)

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