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(Alliance News) - There has been a resurgence of dealmaking among London-listed companies in recent days, with some market participants encouraged by the development, while others fear firms are falling prey to opportunists.
On Monday, Network International confirmed it has received a non-binding takeover proposal from a private equity consortium.
The Middle East and Africa-focused payments provider said the proposal is for a possible cash offer of 387 pence per share from CVC Advisers Ltd and Francisco Partners Management Ltd. The price is a 58% premium to the closing price on Wednesday, before any announcement was made.
Fellow FTSE 250 constituent John Wood Group announced it was engaging with Apollo Management about its final takeover proposal of 240p per share. Apollo had announced the fifth proposal in early April.
Then, mid-morning, e-commerce company THG PLC confirmed it had also received an approach from Apollo Global Management.
Only on Friday had Dechra Pharmaceuticals PLC surged some 40%, as it confirmed it had entered discussions about a possible offer from private equity firm EQT.
"There is a sense among international investors that the UK is ripe with takeover targets," interactive investor analyst Victoria Scholar considered.
"The recent rebound for the pound suggests opportunistic buyers need to make the most of sterling's weakness before it appreciates further and is too late as the FX discount subsides," Scholar noted.
At around USD1.2406 on Monday morning, the pound is 5.0% below what it was valued at a year ago. However, it has bounced back from its lows of around USD1.08 back in September, prompted by the UK government's infamous "mini-budget".
AJ Bell investment director Russ Mould sees an additional reason for the flurry of M&A in the City, commenting: "Takeovers seem to be falling into two camps at present. They're either being driven by cheap valuations which means predators can strike a bargain, particularly if foreign exchange rates are working in their favour.
"Or deals are happening because companies have hit a wall and need fresh thinking from a new owner to create value."
The latter may certainly be the case for THG, which has had a rough trajectory since going public. Despite its shares jumping 38% to 91.31p, they are still at a fraction of the initial public offering price of 500p.
THG's Chief Executive Matthew Moulding had even publicly expressed his regret for listing in London, noting the experience has "just sucked from start to finish", in a GQ interview in 2021.
In addition to London's listings being snapped up by private equity at discount prices, the recent drought of IPOs in London in light of heightened market volatility has also been a cause for concern. High-profile flops like THG and Deliveroo PLC provide a further deterrent for firms thinking of listing in London.
"Everything is up for sale at the right price and given the uncertain economic outlook it seems that boards are minded to support takeovers as long as shareholders are not being messed about by unrealistically low offers. That situation might be a lot different in a stronger economic environment," AJ Bell's Mould added.
By Elizabeth Winter, Alliance News senior markets reporter
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