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

By Reuters News

** 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)

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