Citi keeps 'buy' on Challenger, says Daiichi unit likely to sweeten takeover bid

Challenger

Mon 19:44

** Citi retains its "buy" rating on Australia's Challenger CGF.AX and raises its target price to A$13.20
** Brokerage says Daiichi Life's proposed A$11.80 per share scheme offer is unlikely to secure board support at the current level and expects negotiations for a higher price
** Daiichi's takeover offer values the investment manager at A$7.94 billion ($5.54 billion)
** Citi adds recent financial services M&A transactions have carried an average premium of around 40% to one-month VWAP, compared with Daiichi's current offer premium
** "Offer surely has to rise, but deal prospects seem strong" — Citi
** Says Challenger's FY27 core basic EPS guidance of 45 - 49 Australian cents per share remains unchanged and raises its core EPS forecasts by 1% for FY27E and 0.3% for FY28E and FY29E
** Stock up over 25% YTD, as of last close

($1 = 1.4327 Australian dollars)

 (Reporting by Rajasik Mukherjee in Bengaluru)
 ((Rajasik.Mukherjee@thomsonreuters.com))