ITV / TAKEOVER2 Oct 2023 07:36
Fifteen UK stock market listed companies with a combined market value of nearly £170 billion could be vulnerable to takeover, analysis for the Evening Standard shows, in deals that would kick start the City and the moribund stock market.
City bankers says big money rivals, often in the US, are taking a close look at some of Britain’s best-known businesses, driven by the strength of the dollar against the pound, fresh certainty about interest rates that influence borrowing costs and low share values.
For months City experts have been complaining that London listed shares are unloved compared to similar firms in the US. With both economies now likely to avoid recession, bankers say clients are casting their eye over what could be some huge deals.
At £100bn Unilever is the most striking possible target and could prove too big a mouthful for any consortium.
John Choong, markets analyst at InvestingReviews.co.uk said: "Considering the malaise of the UK stock market over the past couple of years and the fact that FTSE shares are now trading at their biggest discounts to fair value in over a decade, it’s no surprise to see talk about potential private equity takeovers pick up. The economic impact of Brexit, a strong USD vs GBP, and pervasive investor scepticism regarding Britain’s growth prospects have all resulted in flat trading volumes. Subsequently, this has left the share prices of many of these companies either flat or on a decline.”
“However, this doesn’t necessarily reflect the performance of these businesses. In fact, it’s been quite the opposite as shareholder yields for FTSE 100 constituents have only improved over the years as both dividends and share buybacks have increased. On that basis, PE firms could see plenty of potential from bagging some of these conglomerates at discounted valuations with the amount of free cash flow they have and can generate."
Yesterday figures from LSEG Deals Intelligence shows that dealmaking in the UK is at a 14-year low. Mergers and acquisitions with any UK involvement came in at $176.1bn (£144.7bn), down 45% on a sluggish 2022, according to LSEG Deals Intelligence. The figures mark the worst period for deal makers since 2009, just after the global financial crash.
Derren Nathan, head of equity research, Hargreaves Lansdown, cites Asos and WH Smith as among his top targets. He says of Asos: “Despite some early progress in turning the ship around, the valuation of this trophy asset in online fashion retail remains beaten up. This could be a target for industry players looking gain a UK foothold.”
On WH Smith he adds: “This is one the private equity vultures have circled before. The shares remain well below their pre-pandemic peak although on fundamentals, valuation still looks quite full. The potential to trim the physical estate may attract turnaround specialists.”
This week David Schwimmer, the CEO of the London Stock Exchange Group, dismissed criticism
Sign In
Follow the stocks
