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A takeover and a merger worth a combined $60 billion helped lift the share market through 7500 for the first time as investors looked for the next acquisition target.
The S&P/ASX 200 rallied 99 points or 1.34 per cent after US payments giant Square snapped up Afterpay, and Santos and Oil Search agreed terms for an energy mega-merger. The index finished at 7491 after rising as high as 7506.3.
The financial sector climbed to a four-week high. CSL, Coles and Woolworths rallied ahead of reporting earnings later this month. A 7 per cent slide in iron ore weighed on miners Fortescue and Rio Tinto.
What moved the market
M&A activity is hotting up after the long pandemic deep freeze. Afterpay soared 18.77 per cent on news Twitter founder Jack Dorsey’s Square will acquire the Aussie BNPL leader for $39 billion. Santos and Oil Search announced plans to merge to create a $21 billion global energy giant.
Afterpay announced it had agreed to an all-stock takeover that values the company at around $39 billion, a 30.6 per cent premium to Friday’s closing price. Australian shareholders will receive 0.375 shares of Square Class A common stock for each of their shares in Afterpay. Co-founders and co-CEOs Anthony Eisen and Nick Molnar will stay on.
“Square and Afterpay have a shared purpose,” Jack Dorsey, co-founder and CEO of Square, said. “We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles.”
The news stoked buying interest in other local BNPL players. Z1P Co climbed 9.04 per cent, Sezzle 3.74 per cent and Splitit 8.7 per cent. humm gained 3.74 per cent, IOUpay 7.5 per cent and Laybuy Group 10.47 per cent.
Santos and Oil Search announced they had agreed terms after Santos revised its offer for its PNG rival. Under the new proposal, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share, up from a ratio of 0.589:1 under the initial offer.
The Oil Search board said they intended to recommend the offer, subject to each side carrying out due diligence and gaining shareholder, regulatory and PNG court approval. Oil Search shares rallied 4.72 per cent. Santos gained 0.62 per cent.
Today’s announcements add to a recent revival in mergers and acquisitions. Many companies are sitting on cash after building buffers against the impact of the pandemic. Companies on the receiving end of external overtures in recent months, welcome or unwelcome, include Boral, Iress, Crown Resorts, Sydney Airport, API, Vocus and Altium.
Upbeat US futures helped soothe any worries about Friday’s US sell-off. S&P 500 futures jumped 23 points or 0.52 per cent, hinting at a swift reversal of the 0.54 per cent decline that ended last week.
House values across the nation’s capitals climbed 1.6 per cent last month, extending the rally over the last 12 months to 16.1 per cent. Prices in Canberra, Hobart and Darwin have risen more than 20 per cent in the last year, according to the CoreLogic Hedonic Home Value Index.
Job advertising declined for the first time in 14 months as the Greater Sydney lockdown took effect. Total advertising declined 0.5 per cent.
Winners’ circle
All 11 sectors advanced, aided by first-of-month institutional buying and optimism about a new reporting season. Much of the market will report full-year earnings over the next four weeks.
The tech sector flew up 6.54 per cent. Trailling in Afterpay’s wake were Appen +3.87 per cent, EML Payments +3.66 per cent and WiseTech +3.38 per cent.
The financial sector has tracked sideways for more than a month, but hit a four-week peak this session as the banks took over from the pace-setting miners. NAB rose 2.39 per cent, CBA 2.02 per cent, Westpac 2.08 per cent and ANZ 1.8 per cent.
Other movers at the heavyweight end included CSL +1.88 per cent, Coles +1.77 per cent, Wesfarmers +1.72 per cent and Woolworths +1.29 per cent.
Dicker Data climbed 15.95 per cent on news the tech wholesaler will acquire NZ-based Exeed Group for $68 million. The deal will make Dicker New Zealand’s second-largest I.T. distributor.
Doghouse
Most of the iron ore giants retreated from last week’s record highs following a sharp retreat in iron ore. The spot price for ore landed in China dived 7.4 per cent on Friday as China ramped up an environmental clampdown on steel output. The setback extended ore’s decline last week to 10.6 per cent.
Data over the weekend showed a slowdown in Chinese factory activity. The official manufacturing PMI eased to 50.4 last month from 50.9 in June. Services activity also eased a fraction, from 53.5 to 53.3.
“None of the factors for slower manufacturing and non-manufacturing growth have gone away,” ING’s chief economist for Greater China, Iris Pang, said. “In fact, more policy directions were announced on 30 July, and they are directly from a meeting chaired by President Xi. Those policies aim at solving problems to achieve long-term economic stability, which could sacrifice short-term growth momentum.”
Fortescue Metals fell 2.09 per cent. Rio Tinto lost 0.14 per cent. BHP inched up 0.39 per cent. Champion Iron dropped 4.21 per cent.
Other markets
Asian markets clicked into gear in afternoon trade. The Asia Dow gained 1.24 per cent, Japan’s Nikkei 1.95 per cent, China’s Shanghai Composite 1.72 per cent and Hong Kong’s Hang Seng 1.08 per cent.
Oil reversed into the new month. Brent crude dropped 91 US cents or 1.21 per cent to US$74.50 a barrel.
Gold retreated US$2.20 or 0.12 per cent to US$1,815 an ounce.
The dollar rose 0.08 per cent to 73.47 US cents.
