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From IC
BT has asked the investment bank to factor in a takeover bid worth in the region of £15bn, or 151p a share, representing an approx. 50 per cent premium to the last closing price prior to the revelation.
The group’s market valuation has fallen by 37.1 per cent over the past year, with some analysts suggesting that it is trading at around half the value of its Openreach broadband infrastructure business.
Recent share price weakness is partly down to the decision to suspend the group’s dividend in the face of Covid-19, but a downward trend has been in evidence since November 2015 when BT’s shares were changing hands at 499p.
With net profits of £1.93bn and operating cash-inflows of £6.27bn for FY2020, there are certainly attractions from a merger arbitrage angle, but the privatised utility comes with a lot of baggage.
The group was brought to the market in 1984, a high-water mark for privatisations. Unfortunately, it has been hamstrung by many of the regulatory anomalies faced by former state-owned businesses. Whether they be engaged in water, rail, or mail, the privatised utilities have been legally bound to serve wider interests beyond those of their owners. Experience shows that it difficult to accommodate the opposing interests of shareholders, customers, and government regulators.
BT remains the UK’s largest provider of broadband and mobile services, but any potential suitors will be compelled to fund the roll-out of superfast broadband to UK households by the end of the decade. That is in addition to the task of completing the country’s 5G network now that China’s Huawei Technologies has been kicked into touch. Buyers may also baulk at the prospect of funding the group’s elephantine pension deficit.
Management has not let on which potential buyers are in the frame, though Deutsche Telecom AG (ETR: DTE) has previously been mentioned in despatches. That may present something of a national security conundrum for the UK government given that the lion’s share of Deutsche Telekom’s domestic 5G network was built by Huawei.
A parliamentary bill is due out in the autumn which promises to clarify the UK's approach to national security and foreign investment. Following on from the Huawei saga, it would seem perverse that the government would revert to a ‘light-touch’ regulatory approach. The deal could be a bridge too far for the German telecom giant, even though it remains a substantial shareholder in BT.
There is speculation, however, that private equity interests may be considering a tilt. It is doubtful that interest from this quarter would elicit a sympathetic response from Whitehall, especially given BT’s centrality to the UK’s digital transformation. It is plausible that a private equity buyer could resort to the standard playbook by launching a proxy campaign against the BT board – a prospect which could certainly have triggered the approach to Goldman Sachs.
You knew this was coming
102 minimum close tomorrow, or I'm a monkey's uncle.
O dear !!!
Saying that. I didn't think it was bad performance from BT considering what happened to the ftse.
So I bought a few at 102. Hopefully an upturn next week. Is it all doom and gloom Velo as it closed below 102 ?
Well o thought my buys were at good levels. Just below £1, 104 and 107. Another hammering today. One more down day and I'm out. Probably end up selling at the near bottom. Hopefully an up day tomorrow . Next support level 104. Any advice Velo. Other than don't buy bt share ever again.
Hi Velo. What is the "predominant trend" in BT?
The predominant trend is bearish. But it's got to turn at some point Catching a falling knife I hear you say. My trading strategy is long term. Not day trading. But I am not attached to the shares therefore if it goes below £1. I will sell. I picked up a few below £1. 104 and 107. I will buy more as it moves upwards. Triggering the signals and also keeping an eye on the resistance level andon the momentum levels. I am very much a novice. Let the trend be your friend. I get that but I believe we are at a turning point. All thoughts very welcome .
From my limited knowledge. The 10 day ma has gone positive for the 2nd day. 1st positive sign. Now we need the 10 day ma to cross the 20 day ma. 2nd positive sign. What works best for BT, 10 20 50 ma or 9,18 45 ma ? All thoughts welcome.