The following two ASX shares are on the path for takeovers. Here is the take from our analysts.

Cleanaway (ASX: CWY): Enters into scheme implementation deed With EQT Infrastructure

Cleanaway has entered into a scheme implementation deed with EQT Infrastructure, under which EQT, via Sedum Group, intends to acquire 100% of shares in Cleanaway by way of a scheme of arrangement. Cleanaway’s board unanimously recommends the scheme.

Why it matters: The $3.095 per share cash offer, less any dividends paid, is attractive. It represents a 24% premium to our stand-alone valuation and a 31% premium to the undisturbed closing share price on Aug. 12, 2026, prior to the offer being known.

The bottom line: We raise our fair value estimate for no-moat Cleanaway by 5% to $2.95 per share. This assumes a 75% probability that the deal goes ahead, from 50% previously. If the deal does not proceed, we would revert to our stand-alone valuation of $2.50 per share. Shares are fairly valued.

  • We expect a component of the sale price to be distributed as a dividend, to use the company’s franking credit balance. This is likely to be in the region of $0.15 to $0.19 per share, the latter being the maximum permissible distribution.

Between the lines: Regulatory approval is needed from the Foreign Investment Review Board, the Australian Competition and Consumer Commission, and competition authorities of Kuwait and Saudi Arabia.

  • The board unanimously supports the scheme, recommending shareholders vote in favor of it in the absence of a superior proposal and subject to an independent expert concluding that the scheme is in the best interests of Cleanaway shareholders.

Coming up: A scheme booklet is expected in mid-December, with a scheme meeting before the end of February 2027. Shareholders do not need to do anything at this stage, and we will provide voting guidance closer to the scheme meeting date.

Challenger (ASX: CGF): A deal is more likely than not; Shares overvalued on a stand-alone basis

Challenger received a nonbinding indicative offer from TAL Daiichi Life Australia at $11.80 a share, 17.7% above its one-month volume-weighted average price of $10.03. The offer came as Challenger’s first-quarter fiscal 2027 update showed a 5% rise in assets under management.

Why it matters: The 19% share price jump to about $11.75 shows the market pricing in a high likelihood that the deal progresses, as proposed or at a higher price. We think the board will push TDA for a higher premium. Our 75% chance of a deal at this price gives no credit for a higher bid.

  • TDA paid a much bigger premium, 53%, for its first stake in Challenger in April 2025. The indicative offer is around 50% above our stand-alone fair value estimate, which we think compensates investors well for a higher-risk guaranteed-return business selling commoditized annuities.
  • First-quarter sales volumes came in well ahead of our projections, pointing to solid demand and strong sales momentum. We raise our projected annuity sales volumes, but that lifts our stand-alone fair value estimate by only 3%.

The bottom line: We raise our fair value estimate for no-moat Challenger to $10.85 a share from $7.70. We assign a 75% probability that Challenger is acquired at $11.80 and 25% that no deal is completed, with value reverting to our stand-alone fair value of $7.90, up 3% on higher sales volumes.

  • A deal at these terms is more likely than not: TDA owns 20.5% of Challenger; shares have risen sharply since April 2025, and a rival bid looks unlikely. The 17.7% premium is modest, so the board may push for more, which we do not count. A higher bid would lift our fair value estimate.
  • Shares at about $11.75 sit 8% above our fair value estimate and price the deal as certain. Stand-alone, we think Challenger is overvalued: the market underestimates competition and expects too much earnings growth as mix shifts to lower-earning products and maturities—akin to outflows—rise.