The Boral Limited (ASX: BLD) share price surged for the second day on rumours that it may be a takeover target.

Shares in the building materials group jumped 6.6% to $3.54 on Tuesday – making it the third best performer on the S&P/ASX 200 Index (Index:^AXJO) after the Perenti Global Ltd (ASX: PRN) and Domain Holdings Australia Ltd (ASX: DHG) share price.

Corporate interest in Boral

The big jump in Boral, which puts its two-day gain to nearly 14%, puzzled many before rumours were published in the Australian Financial Review pointing to a large buyer.

It’s speculated that Kerry Stokes’ Seven Group Holdings Ltd (ASX: SVW) has been a keen buyer of the stock on Friday when 150 million Boral shares changed hands. That’s equivalent to 12% of Boral.

We should know soon if Seven Group is behind the frenzy as it will need to lodge a substantial holder’s notice with the ASX this week – assuming the rumours are true.

Why Seven Group might be interested in Boral

Such a move makes strategic sense. First, Seven Group has a track record of buying businesses, such as construction equipment rental company Coats Hire.

Boral will allow the group to expand vertically into the infrastructure construction sector by providing both materials and equipment.

Seven Group is tipped to win work on the Snowy Hydro 2.0 project, the Western Sydney Airport and WestConnex extensions, according to the AFR.

Wounded animal

Boral is underperforming the market after a series of management missteps that culminated in its chief executive Mike King announcing his exit in August.

Not only is its share price in the doldrums, which makes it an opportunistic target, but its effectively leaderless. All the more enticing for any would be acquirer.

But a full takeover isn’t a sure thing.

Next move may not be a takeover

Boral’s troublesome US business doesn’t quite fit into Seven Group’s portfolio and Boral is facing a class action lawsuit over an accounting scandal involving the group’s US windows business.

Any new owner of Boral would be liable to pay damages if the court rules against the Boral.

So, this means that Seven Group may be buying itself a seat at the table in any carve-up of Boral’s assets.

Boral is under pressure to consider a radical restructure that would involve divesting assets.

Foolish takeaway

I have picked Boral as an ideal tax-loss selling candidate a week ago, before the corporate action was revealed.

This doesn’t change my dim view of Boral as I don’t recommend investors buy shares solely based on takeover hopes.

I rather stick to better quality names in the industry like James Hardie Industries plc (ASX: JHX) and CSR Limited (ASX: CSR).

Further, these stocks are better placed to benefit from the federal government’s new housing grants, which are expected to be announced this week.

More reading

• ASX 200 rises 0.3%, Zip rockets higher
• Why Coles and Woolworths shares were flat in May
• 3 long-term impacts of near-zero interest rates
• 3 things ASX investors need to know about the RBA’s rate decision today
• These ASX shares were among the best performers in May, surpassing the ASX 200

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

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.

The post This embattled ASX 200 company could be the next M&A target appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) went up by 0.3% today as the ASX continued its steady climb upwards. The ASX 200 finished at 5,835 points.

The protests in the US are grabbing the attention with the coronavirus currently not at the forefront of people’s minds. This year has been very eventful so far.

Zip Co Ltd’s (ASX: Z1P) big acquisition

The Zip share price flew higher today by 38.7%. The company announced that it’s going to buy the rest of US-based QuadPay by issuing up to 119 million shares to QuadPay shareholders. The deal implies an enterprise value of US$269 million for Quadpay.

Zip described Quadpay as one of the leading BNPL providers in the US. Based on the first quarter in 2020, QuadPay has annualised revenue of $70 million and annualised total transaction value (TTV) of $900 million. It also has a net transaction margin of more than 2%.

The combined ASX 200 business will have $3 billion of annualised TTV and annualised revenue of $250 million.

Zip has also entered into an agreement with CVI Investments to raise up to $200 million with convertible notes and warrants.

Brickworks Limited (ASX: BKW) trading update

The ASX 200 building products business gave a trading update today. Over the past few months it has managed to make a profit from its Australian building products business, but the US division saw negative earnings.

Australian building product revenue was only down by 10% in the four months to 31 May 2020 compared to the prior corresponding period. Development approval has been received for the new $125 million brick plant at Horsley Park in NSW.

Progress continues at the Oakdale site.

Australia and New Zealand Banking Group (ASX: ANZ) sale

ANZ has finally managed to sell its UDC Finance business for NZ$762 million to Shinsei Bank, a large Japanese business.

The sale will provide around $439 million of level 2 group CET1 capital once settled for the ASX 200 bank. It’ll also released more than NZ$2 billion of funding provided by ANZ New Zealand.

Shinsei intends to preserve UDC’s operations, retain employees and grow the business.

More reading

• This embattled ASX 200 company could be the next M&A target
• Why Coles and Woolworths shares were flat in May
• 3 long-term impacts of near-zero interest rates
• 3 things ASX investors need to know about the RBA’s rate decision today
• These ASX shares were among the best performers in May, surpassing the ASX 200

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Brickworks. 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.

The post ASX 200 rises 0.3%, Zip rockets higher appeared first on Motley Fool Australia.

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Overall, May was an extraordinary month for ASX shares. The S&P/ASX 200 Index (ASX: XJO) managed to bank an increase of 4.2% for the month, helped in large part by the ASX banks like Commonwealth Bank of Australia (ASX: CBA).

But other some ASX shares weren’t really joining in the party.

Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) are 2 examples.

The Coles share price started May at $15.51 per share but ended the month at $15.36, meaning the company actually went backwards by 0.97% over the month.

Meanwhile, Woolworths shares began the month at $35.75 per share and concluded May at $35.34, again, down 1.15%.

So why have Woolies’ and Coles’ share prices lagged so dramatically over May? And perhaps more importantly, does this mean there might be some buying opportunities right now?

Why Coles and Woolies have been lagging lately

It’s worth remembering that both the Woolworths and Coles share prices were holding up remarkably well during the market crash we saw in March. Between 20 February and 23 March, the ASX 200 lost more than 36% of its value. Over the same period, the Coles share price ‘only’ lost 3.53% and Woolworths was down 16.4%.

It’s this defensiveness that is leading Coles and Woolworths to lag the broader market’s recovery in my view.

If a stock isn’t volatile relative to the ASX 200 during bad times, it typically displays similar inertia during good times.

Are Woolworths or Coles shares a buy today?

It’s worth noting that I think Woolworths shares were getting a little overpriced prior to the March crash, which explains why they performed poorly compared to the Coles share price during the crash.

Thus, I would class both Coles and Woolworths shares as ‘fairly valued’ today, despite their recent market performance.

But ‘fairly valued’ is still a long way from being a ‘bargain buy’.

On current prices, Coles is trading on a price-to-earnings (P/E) ratio of 17.44 and Woolworths on 17.7. Given that the broader ASX 200 P/E is sitting at 18.98 on average, I’m not really too compelled to add these shares to my portfolio today.

But there might be some merit in these 2 ASX giants if you’re a dividend income investor. Unlike many other ASX blue chips, I think both Coles and Woolworths will easily be able to fund their dividend payments in 2020. The grocery business is very defensive and should hold up no matter what happens with the economy for the remainder of the year.

So long story short, I would class both Coles and Woolworths as reasonable ‘buys’ today for dividend income, but not for much else.

More reading

• This embattled ASX 200 company could be the next M&A target
• ASX 200 rises 0.3%, Zip rockets higher
• Smash low interest rates with these ASX dividend shares
• 3 long-term impacts of near-zero interest rates
• 3 things ASX investors need to know about the RBA’s rate decision today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths 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.

The post Why Coles and Woolworths shares were flat in May appeared first on Motley Fool Australia.

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