The Infigen Energy Ltd (ASX: IFN) share price is flying higher this morning in response to a takeover bid.

Infigen is a provider of renewable energy. The company generates renewable energy from its owned wind farms in New South Wales, South Australia and Western Australia. It also sources renewable energy from third-party renewable projects.

Infigen holds energy retailing licenses in the National Electricity Market regions of Queensland, NSW, ACT, Victoria and SA.

Why the Infigen Energy share price is going gangbusters

This morning, UAC Energy announced a takeover bid for Infigen Energy. UAC is an investment holding company owned by the AC Energy Group (a subsidiary of Ayala Corporation in the Philippines) and UPC Renewables Australia.

UAC intends to make an off-market takeover bid of 80 cents per Infigen stapled security. This offer represents a 35.59% premium to yesterday’s closing price of 59 cents and implies total equity value of $777 million.

UAC pointed out that the Infigen share price has not closed higher than 80 cents since August 2017. It believes the offer price is attractive and “presents compelling value in the context of the price performance of Infigen stapled securities”.

Commenting on the attractiveness of the offer more specifically, UAC said: “The Offer is particularly attractive in the context of recent falls in electricity prices as well as Infigen’s relatively high debt servicing costs, its limited track-record in paying distributions and decisions taken by Infigen to suspend investment in a number of projects and defer the delivery of its development pipeline.”

UAC also announced this morning it has acquired an aggregate interest in 12.82% of Infigen stapled securities. This consists of beneficial ownership of 9.9% and economic interest in a further 2.92% via a total return swap.

What now?

The offer will be subject to a number of conditions, including approval from the Foreign Investment Review Board. However, it will not be subject to a minimum acceptance condition.

UAC intends to provide a copy of the bidder’s statement to Infigen securityholders “in due course”. The statement will contain key information such as reasons to accept the offer and instructions on how to accept the offer.

Infigen is yet to release an announcement of its own regarding the takeover bid. At the time of writing, the Infigen share price has rocketed 35.59% higher to 80 cents, on par with UAC’s offer price of 80 cents.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week, Prime Minister Scott Morrison gave a 1-hour speech that outlined ways the government would work to create jobs within the Australian economy. This will be known as the JobMaker program and will include changes to industrial relations (IR) laws, along with skills and training.

The 3 S&P/ASX 200 Index (ASX: XJO) shares discussed below have seen a significant amount of their gains in recent years absorbed by higher wages. If new IR laws come into play that allow a reduction in these wage bills, these companies could potentially have the capacity to pay higher dividends to shareholders.

Telstra Corporation Ltd (ASX: TLS)

Telstra is Australia’s largest telecommunications company providing physical networks, hardware, mobile, voice and internet services. In the half year to December 2019, Telstra paid $2.17 billion in labour costs. That’s almost double its net profit of $1.15 billion.             

According to its annual report, Telstra has a highly skilled workforce of 29,769 full-time employees, many of whom are likely receiving pay rises every year. This can erode profits and is significant given that Telstra’s wages bill forms such a large amount of its expenses.

Last year, Telstra came close to a strike by some of its employees. It averted the action by offering better conditions and pay rises. Over the last year, Telstra paid dividends of 16 cents per share, fully franked. If the group sees reworked IR laws, it may have scope to reduce its labour bill and increase dividends.

BHP Group Ltd (ASX: BHP)            

BHP is an Australian-based global mining and energy giant. It has 72,000 employees, many of which are in Australia and work in highly skilled mining roles. Recent enterprise agreements proposed by BHP were struck down by the Fair Work Commission. If enterprise agreements that are more favourable for BHP are introduced and accepted due to reworked IR laws, it could see its wages bill reduced. This should lead to higher dividends.

In its latest annual report, BHP set out that it aims for no lost time due to industrial action. While this may help to keep production levels high, it also means that BHP may often be at the mercy of unions in negotiating collective agreements. Reworked IR laws will potentially make it easier for BHP to negotiate agreements with workers, with less fear of industrial action.

At the time of writing, BHP trades on a trailing dividend yield of 5.97% fully franked. This works out to about $6.2 billion in the last year. Payments to employees were $6.06 billion, therefore any reductions in wages could be favourable for shareholders.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is an Australian conglomerate with interests in retail, coal mining, chemicals and fertilisers. It owns distinctive retail brands including Bunnings, Target, Kmart and Officeworks. Wesfarmers is one of the largest employers in Australia with 223,000 employees. Many of those employees are skilled and covered by collective agreements. These are the types of agreements the Prime Minister may be targeting, as they often include penalties and loading for weekend or overtime work. 

In 2019, Wesfarmers paid $4.14 billion in remuneration for continuing operations. This was a significant 5.67% increase on the prior year. Revenue on the other hand only increased 4.3% over the same period. Net profit after tax was $1.9 billion in 2019, less than half the amount paid out in wages.

Wesfarmers has a trailing dividend yield of 3.72% fully franked. If penalties and overtime are targeted as part of the JobMaker package, this could improve significantly. This is especially significant for Wesfarmers given the amount they pay out in wages each year.

Foolish takeaway

The details of the JobMaker program have not been released, however, investors could profit from getting in early. If the Prime Minister does change industrial relations laws in a way that is favourable for companies like these, it could mean a solid increase to dividends.

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Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking to add one or two small cap ASX shares to your portfolio in June, then I think the two listed below are worth considering.

Here’s why I think these small caps could be destined for big things in the future:

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan is a $276 million tech company which provides enterprise mobility software to businesses. This software help improve mobile worker productivity and has a track record of increasing sales win rates and reducing costs. Unsurprisingly, this has gone down well with businesses and a growing number of blue chips are using its software. This includes one of the big four banks, Australia and New Zealand Banking GrpLtd (ASX: ANZ).

Pleasingly, its strong growth has continued unabated during the pandemic. Management recently reaffirmed that it is on track to achieve its 30% to 40% organic revenue growth target in FY 2020, with stable retention. I think this makes it one of the best small cap ASX shares on the local market.

ELMO Software Ltd (ASX: ELO)

Another small cap ASX share which I think could grow strongly over the next decade is ELMO Software. It is a $560 million software company which provides businesses with a cloud-based human resources and payroll software solution. This unified solution is proving very popular with businesses that are wanting to streamline everyday processes such as payroll, recruitment, and learning.

ELMO recently completed a $70 million placement, with the proceeds being used to accelerate organic growth initiatives and to fund acquisition opportunities. I believe these funds could be used to expand internationally in the future as well. Not that it necessarily needs to. Management estimates that the ANZ market is worth $2.4 billion. This compares to its FY 2020 revenue guidance of $50 million to $52 million, which will be up 17.4% to 22% year on year. I think this makes ELMO a small cap to watch.

More reading

• ASX 200 rises 0.3%, Zip rockets higher
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• How to value the big four ASX banks

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BIGTINCAN FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. The Motley Fool Australia has recommended BIGTINCAN FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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