The Ramsay Health Care Limited (ASX: RHC) share price will be one to watch on Thursday.

This follows the announcement of a potential new acquisition after the market close today.

What did Ramsay announce?

This afternoon Ramsay announced that it has made an all-cash offer of 240 pence per share to acquire 100% of Spire Healthcare Group plc shares via a scheme of arrangement. This represents a premium of approximately 24.4% to the closing price of Spire shares on 25 May.

According to the release, Spire is a London Stock Exchange-listed independent hospital group in the United Kingdom with a focus on the private patient market. It is also a leading provider of high-acuity care.

The offer of 240 pence per share values Spire’s entire issued and to be issued share capital at approximately 1 billion pounds (A$1,822 million) on a fully diluted basis and approximately 2 billion pounds (A$3,707 million) on an enterprise value basis.

The good news for Ramsay and its shareholders is that the Spire Board is unanimously recommending its shareholders vote in favour of the scheme. In addition, directors that own shares have irrevocably undertaken to vote in favour of the scheme, as has major shareholder Mediclinic International and the former Chairman of Spire, Garry Watts.

Though, Mediclinic International’s vote is subject to no competing higher offer emerging at 10% or more than the offer consideration.

Combined, the irrevocable undertakings represent approximately 30.4% of Spire’s issued share capital.

Acquisition rationale

Management believes the acquisition will be transformational for Ramsay’s UK business.

It is expecting it to create a leading private health care services provider. It will also diversify Ramsay UK’s payor sources, and case mix, expanding the geographic reach of its capabilities and improving capacity utilisation.

Ramsay also expects the acquisition to establish an enhanced offering for private patients, deliver scale to further invest in clinical research, development and innovation to improve patient outcomes, and provide the foundation for further growth. This is in line with Ramsay’s strategic vision of creating the leading ecosystem for patient centric, integrated care.

Positively, for shareholders and the Ramsay share price, the deal is expected to deliver significant value. This will be driven by benefits of at least 26 million per annum from procurement savings, improved capacity utilisation, and cessation of UK listing costs. This is forecast to result in high single digit earnings per share accretion in FY 2024.

Ramsay will be funding the acquisition through debt. And despite taking on the extra debt, it has no plans to change its dividend payout ratio in FY 2021. It intends to keep it in line with historical levels.

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The Core Lithium Ltd (ASX: CXO) share price has finished the day significantly up following a positive market announcement.

At market close, the lithium producer’s shares were trading at 24 cents a pop, up 6.67%.

What was announced?

According to its announcement, Core Lithium has entered into an agreement with Darwin Port Operations Pty Ltd (DPO).

The 5-year Port Operating Agreement (POA) gives Core Lithium access to the port’s facilities to export its products. It covers the company’s direct ship ore (DSO) and spodumene concentrate.

Port facilities include a truck dump, ship loader and conveyor, and berths for vessels.

Core Lithium’s wholly-owned subsidiary Lithium Development will supply all labour to operate the facilities when handling its product.

The agreement follows a non-binding deal signed by Core Lithium and DPO in early 2017.

Core Lithium said the short distance on existing roads from the company’s Finniss project to Darwin’s port means minimal capital and low operating costs on haulage. The company estimates it has one of the lowest logistics costs among hard-rock lithium miners and developers in Australia.

Core Lithium managing director Stephen Biggins said:

Access to key infrastructure like Darwin Port and the capital city of Darwin in northern Australia enables Core to build one of the most capital efficient and cost competitive hard-rock lithium projects in the world.

With a successful FID expected in coming months, Core is aiming to commence export of high-quality lithium concentrate from Darwin Port by the end of next year.

Core Lithium share price summary

In the past year, Core Lithium shares have surged by 300%, with year-to-date performance putting the company’s value around 65% higher. The Core Lithium share price reached an all-time high of 42 cents in early January this year.

The company has a market capitalisation of around $281 million, with more than 1.1 billion shares on its registry.

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Last week we discussed Commonwealth Bank of Australia‘s (ASX: CBA) move to raise its fixed-term interest rates on mortgages. At the time, CBA’s move was an interesting one, and as we flagged, a potential harbinger for the ASX banking sector going forward. Since the Reserve Bank of Australia (RBA) has repeatedly indicated that interest rates will be on hold at the current near-zero levels until 2024 at the earliest, CBA’s move could be construed as defiant. It implied the bank saw a possible risk in blindly following what the RBA was preaching, essentially betting rates will move higher at least a little sooner than the RBA has flagged.

Today we colour in that picture a little more. According to a report in the Australian Financial Review (AFR) today, National Australia Bank Ltd. (ASX: NAB) has also raised its fixed-term interest rates. Its 4-year rate rose by 21 basis points to 2.19% and its 5-year rate went up by 25 basis points to 2.49%. Both moves were effective from 12 May. 

Is NAB defying the RBA too?

On the surface it looks to be a similar move to CBA. But the AFR quotes NAB’s chief economist Alan Oster on the matter, who provides some nuance. Oster, perhaps contrary to what many commentators are saying right now, doesn’t believe rates will rise substantially until 2025.

Essentially people are worrying about inflation, that inflation is going up faster than the [US] Federal Reserve or the Reserve Bank anticipated, and they have to move earlier… Also there is an issue for the banks with the [rising popularity of] fixed rates in that there is not as much margin in them. I think it’s just fine-tuning… When the bank [RBA] finally gets going they might feel a bit behind and have to go up probably by 2 per cent in 12 to 18 months, but we are talking 2025… You can’t have cash rate at 0.1 per cent forever.

Oster seems to indicate that the hikes the big banks are making have more to do with a self-fulfilling prophecy, rather than an actual belief the RBA will move sooner than it has flagged. If bond yields rise, it indicates that the market is pricing in higher interest rates down the road. But rising bond yields raise the cost of funding for the banks, forcing them to pass this on to borrowers, and giving the impression the banks think the RBA is wrong. Oster indicates this is what’s behind NAB’s recent move.

Only time will tell how quickly the RBA raises rates, whether that’s 2022, 2024 or 2025. One thing looks more certain than it did a few months ago; interest rates seem to have found their bottom.

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ASX shares might benefit from the United States President Joe Biden’s plan to source metals for its electric vehicle (EV) industry from nations including Australia, Canada, and Brazil.

According to reporting by Reuters, Biden is turning to the US’ allied nations to source metals used in EV manufacturing, which he plans to increase during his presidency.

2 US administration officials also told Reuters the US has allocated $174 billion to EV manufacturing.

The Australian Financial Review reported that the move would help the US move away from relying on Chinese metals for its EV industry.

Deputy White House national climate adviser Ali Zaidi was reported by Reuters to have said that the US is looking to invest in supply chains that include recycling.

Let’s take a look at 3 ASX shares that could benefit from the US’ international sourcing of EV metals.

ASX electric vehicle-focused shares

Ecograf Ltd (ASX: EGR)

Ecograf is an Australian battery anode material producer. It already focuses on selling its products to EV and lithium-ion battery manufactures.

Ecograf claims its Western Australian facility is the worlds first to process purified spherical graphite outside of China.

Spherical graphite is a key component of lithium-ion batteries, which are used in EVs.

Additionally, Ecograf sources its graphite from its Epanko Graphite Project, located in Tanzania.

Ecograf is focused on making the production of spherical graphite more eco-friendly. It also works to recycle disused lithium-ion batteries.

Galaxy Resources Limited (ASX: GXY)

Galaxy Resources is an Australian lithium producer.

The company operates the Mt Cattlin Spodumene Project in Western Australia. Mt Cattlin’s products are also qualified to be used in the global lithium-ion battery chain.

Currently, most of the products of Mt Cattlin are exported to Asia.

Galaxy also has a lithium project in Canada, named James Bay. James Bay is still in development, but Galaxy already plans for its products to be used in the North American EV industry.  

Lynas Rare Earths Ltd (ASX: LYC)

Finally, Lynas Rare Earths may also benefit from the US’ spin towards internationally sourced metals.

According to Lynas, it’s the largest producer of separated rare earths outside of China. Additionally, its rare earths can already be used in EV manufacturing.

Its Mt Weld Central Lanthanide Deposit is located in Western Australia.

Currently, Lynas sends its products from Mt Weld to Malaysia to be processed. Though it’s in the process of building a new processing plant in Kalgoorlie.

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The REA Group Limited (ASX: REA) share price was a positive performer on Wednesday.

At one stage, the property listings company’s shares rose 3.5% to a record high of $165.37.

The REA Group share price ultimately ended the day 3% higher at $164.40.

Why did the REA Group push higher today?

The REA Group share price was given a boost in afternoon trade from news that the Foreign Investment Review Board (FIRB) has given the tick of approval to its acquisition of mortgage broker Mortgage Choice Limited (ASX: MOC).

According to the release, REA has received written correspondence from FIRB that the Commonwealth has no objections under the Foreign Acquisitions and Takeovers Act 1975 to the proposed acquisition of Mortgage Choice by way of a scheme of arrangement.

Though, the takeover remains subject to a number of outstanding conditions. These include approval by the Mortgage Choice shareholders at a scheme meeting scheduled for 10 June. However, this appears to be a mere formality, with the company’s directors unanimously recommending that shareholders vote in favour of the scheme.

Why is REA Group acquiring Mortgage Choice?

REA Group believes the $244 million acquisition of Mortgage Choice aligns with its financial services strategy. It notes that it will leverage REA Group’s digital expertise, high intent property seeker audience and unique data insights across a larger network.

Furthermore, management believes it provides a compelling opportunity to establish a leading mortgage broking business with increased scale. This will complement the existing Smartline broker footprint, resulting in greater national broker coverage.

Another positive is that the transaction is expected to be immediately earnings per share accretive for REA Group, with potential for future cost and revenue synergies.

REA Group’s Chief Executive Officer, Owen Wilson, commented: “The acquisition of Mortgage Choice represents an exciting opportunity for REA to create a leading broking business. It builds on our success to date, accelerating our financial services strategy while leveraging our existing strengths and capabilities.”

With the REA Group share price at a record high, the market appears to agree with Mr Wilson.

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The Future Fund is normally an institution that Australians look to for comfort and stability. After all, the $179 billion sovereign wealth fund technically belongs to all of us. 

So it might raise some alarm bells that the future fund is reportedly worried about future inflation. According to a report in the Australian Financial Review (AFR), that’s what the Future fund’s chief executive Raphael Arndt has flagged in a Senate hearing today. The Fund is reportedly hiring more than 150 extra staff to “prepare for fundamentally changed market conditions”.

Here’s some of what Mr Arndt said on this matter:

The ability to generate strong returns into the future is more complex and challenging than ever before given the low level of interest rates around the world…

Policy settings continue to support markets for the time being. But this is priced into assets and unwinding these measures will be a complicated exercise… Equally, a failure to reduce the stimulus at the appropriate time could fuel a significant increase in inflation, a risk markets are already starting to focus on.

Future Fund warns of future inflation

Inflation matters enormously in the investing world. That’s due to its potential effects on asset prices. Inflation usually brings higher interest rates with it too. This is what seems to have Mr Arndt concerned.

Higher interest rates usually result in falls in asset prices. That’s because ‘risk-free’ alternatives like government bonds pay higher interest as a result. Most investors would understandably rather have a government bond paying a 4% interest rate than an ASX share which offers a 4% dividend yield.

Since interest rates have been at near-zero levels, investors have been jumping into other asset classes in the hunt for yield. But that could (and probably will) change if rates start rising. And this represents a fundamental risk to a fund like the Future Fund, which is already close to fully invested. 

According to the AFR, the Future Fund has returned an average of 9.1% per annum over the past decade. That’s an easy beat on its 6.1% per annum target. But clearly, Mr Arndt is worried this might not continue for the next decade without some extra (and skilful) hands on deck:

To continue to be successful and to continue to be able to meet what is an increasing challenging investment mandate with interest rates at zero around the world, we needed more staff.

All ASX investors might benefit from taking these comments to heart. If interest rates start to rise, it could well provoke some substantial volatility in all financial markets. Perhaps something we should all be ready for.

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Some mid-cap ASX shares are very promising and might be good ideas to own for the long-term.

These businesses are smaller than some of the ASX’s blue chips and have growth plans.

Here are two to keep an eye on:

BWX Ltd (ASX: BWX)

BWX is Australia’s leading natural beauty business. It has a number of different brands including Sukin, Mineral Fusion, Andalou Naturals, Nourished Life and now Flora and Fauna.

Flora and Fauna is a leading online retailer that is focused on vegan, ethical and sustainable products. In FY20 that business generated $12 million of net sales and forecast to be in the range of between $16.4 million to $17.1 million for FY21. It made $10 million of net sales in FY19.

BWX plans to combine Flora and Fauna with Nourished Life to form a new direct to consumer business unit within BWX.

The mid-cap ASX share explained:

The new business unit will provide an online retail powerhouse focused on a multi-category portfolio of better-for-you, healthy and sustainable products, 80% of which are not available in mainstream retail.

A couple of months ago BWX signed a strategic partnership with Chemist Warehouse Group. It was a 5-year equity-linked deal between the two businesses. It will see the entire range of BWX products available on the Chemist Warehouse online store. It will also have an increased presence in-store for Mineral Fusion and Andalou Naturals.

BWX is expecting to grow its revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) by at least 10% in FY21.

According to Commsec, the BWX share price is valued at 29x FY22’s estimated earnings.

Dicker Data Ltd (ASX: DDR)

Dicker Data is a technology hardware, software and cloud distributor. The business says it prides itself on developing strong long-term relationships with our customers, and helping them grow.

The business distributes a wide portfolio of products from the world’s leading technology vendors, including Cisco, Citrix, Dell Technologies, Hewlett Packard Enterprise, HP, Lenovo and Microsoft.

Dicker Data was able to grow through the difficult COVID-19 FY20 year with net operating profit before tax growth of 27.7% to $81.8 million. It was able to adapt to help with remote working conditions. The company says that IT hardware, software and the internet will continue to be business critical services for today’s remote and digital workforce.

After just completing a new distribution centre, the mid-cap ASX share already has plans for an additional 18,620m2 second stage expansion for future growth. This will lead to substantial inventory growth and technology portfolio diversification to meet emerging and evolving needs of the Australian market.

Profit growth has continued into the first quarter of 2021. Revenue fell 3.5% to $447.7 million, but profit before tax rose 5.7% to $19.4 million. As a result of supply constraints and sustained demand, the gross profit margin increased to 10%, up from 9.7%.

It managed to achieve that profit growth despite a record first quarter in 2020 driven by the remote work movement as a result of COVID-19.

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The Pepper Money Ltd (ASX: PPM) share price has struggled to give the kick its investors might be looking for after a flat debut on the ASX.

Its shares opened at $2.61 on Tuesday, its first day of listing and below its initial public offering price of $2.89. Its shares have failed to push higher on Wednesday, sliding 3.26% to $2.53 at the time of writing.

What does Pepper Money do?

Pepper Money is a little bit different to your atypical big four bank. The company isn’t licensed to accept deposits, but offers a broad range of loan and credit products.

Within the highly competitive lending landscape, Pepper Money targets underserved customer segments such as non-conforming borrowers that are unable to satisfy the criteria of the Major Australia Banks. Its prospectus highlights that the non-conforming market represents approximately 12% of the existing Australian residential home loan market as at December 2020.

The company currently offers three broad categories of products. This includes mortgages predominantly for residential home loans, asset finances primarily for used cars and, loan servicing for residential mortgages and personal loans.

The prospectus revealed that Pepper Money had a market share of ~0.5% of the $2,160 billion Australian and New Zealand mortgage market, and a market share of ~5.1% of the $52 billion Australian motor vehicle and equipment finance market.

The company has a solid track recovery of growth with a respective compound annual growth rate (CAGR) for asset under management, total operating income and net profit after tax of 10%, 35% and 82% respectively, between CY2018 and CY2020.

In CY2020, the company delivered a net interest income of $352.2 million with net profit from continuing operations sitting at $106.3 million. The prospectus forecasts a flat CY21 net interest income of $356.3 million and a 13.5% increase in net profits to $120.7 million.

The Pepper Money share price falls flat

Despite Pepper Money’s unique take on growing its business and solid track record, its shares have struggled to make headway in its first two days on the ASX.

The Pepper Money share price isn’t the only recent finance IPO to fall flat, with Latitude Financial Services Group Ltd (ASX: LFS) also sliding from $2.70 on its first day of listing on 20 April to $2.41 at the time of writing.

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If you’re wanting to invest in the small side of the Australian share market, then the three small caps listed below could be worth a closer look.

While there is certainly still a lot of work to be done, they could have very bright futures ahead of them. Here’s why they could be worth adding to your watchlist:

PlaySide Studios Limited (ASX: PLY)

PlaySide Studios is a Port Melbourne-based video game developer. It has a portfolio of 55 games across a range of categories, including self-published games based on original intellectual property and games developed in collaboration with Hollywood studios. The latter comprises titles relating to Jumanji, The Walking Dead, and Disney Pixar’s Cars. The company has also just signed a deal with Paramount for the Godfather franchise. Management estimates that PlaySide has a global market opportunity worth a total of $77.2 billion per annum.

Serko Ltd (ASX: SKO)

Another small cap share to watch is Serko. It is an online travel booking and expense management provider behind the Zeno Travel and Zeno Expense platforms. The former provides AI-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers. Whereas the latter allows users to automate and streamline the expense administration function, identify out-of-policy expense claims, and prevent fraud. While the COVID-19 pandemic has hit the company hard, it has a very strong balance sheet and equally bright long term growth potential. This is thanks to the growing popularity of its platforms and its game-changing deal with travel giant Booking.com.

Volpara Health Technologies Ltd (ASX: VHT)

A final small cap to watch is Volpara. It is a healthcare technology company that uses artificial intelligence to assist with the early detection of breast cancer. The company achieves this by allowing users to analyse mammograms and associated patient data. They can then use this software to provide clinical decision support and practice management tools in a cost-effective way. Volpara is currently generating ~US$18.6 million (~NZ$27.9 million) in annual recurring revenues (ARR), but estimates that it has a US$750 million ARR opportunity in breast cancer screening. This gives it a significant runway for growth.

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It certainly has been an eventful year for the Nearmap Ltd (ASX: NEA) share price.

The aerial imagery technology and location data company’s shares have had a number of ups and downs.

Unfortunately, though, the downs have been dominating in recent weeks, leading to its shares trading 21% lower year to date.

Is this a buying opportunity for investors?

According to a note out of Morgan Stanley this morning, its analysts believe the recent weakness in the Nearmap share price is a buying opportunity.

The note reveals that its analysts have retained their overweight rating and $3.20 price target on the company’s shares.

Based on the current Nearmap share price of $1.81, this implies potential upside of approximately 77% over the next 12 months.

Why is Morgan Stanley remaining bullish?

Morgan Stanley notes that Nearmap’s management is confident it can deliver positive jaws in FY 2022. It is expecting to grow annual contract value (ACV), revenue, and cash receipts all quicker than its costs during the year.

This is a big positive given the company’s history of increasing costs and cash burn.

In addition to this, the broker was pleased with the extra clarity the company has provided in relation to its legal issues.

It notes that Eagleview’s patent infringement claim relates to roof-management techniques and not all elements of its product. Positively, this part of its offering accounts for less than a quarter of its US business.

Another positive that Morgan Stanley has highlighted is that the company has not experienced any material sales impacts because of the claim. This was a concern that many analysts had when the legal action was first announced.

Is anyone else positive on the Nearmap share price?

Morgan Stanley isn’t the only broker that believes the Nearmap share price can go higher from here.

While analysts at Citi currently only have a neutral rating on its shares, their price target of $2.00 implies potential upside of 10.5%.

Citi explained its view: “While Nearmap is confident that it can successfully defend against Eagleview’s allegations of patent infringement and in our view, Nearmap can still be successful in the US even if it were to lose the lawsuit, we downgrade to Neutral/High Risk as we expect the legal proceedings will likely have a negative impact on demand in the US and this uncertainty could weigh on the share price. New target price is $2.00 (-37%).”

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