Yahoo Finance Allfunds, UK Stocks Touted as Favorite M&A Targets in Survey
(Bloomberg) -- More UK firms are tipped to be takeover targets this year as rock-bottom valuations spark an M&A boom among the country’s stocks.
Most Read from Bloomberg
British stocks accounted for 70% of companies mentioned at least twice in an informal survey of 18 risk-arbitrage desks, traders and analysts conducted by Bloomberg News in March. They included companies such as betting firm 888 Holdings Plc and Direct Line Insurance Group Plc. Overall, Amsterdam-listed Allfunds Group Plc won the single greatest number of votes.
The FTSE 350 Index’s record 45% discount to the MSCI World Index on a key M&A valuation measure, the multiple of enterprise value to earnings, is luring bargain hunters. Recent predictions have touted the UK as ripe for a takeover wave following a period of deteriorating business confidence and tough financing conditions.
Read More: Ninety One CEO Touts ‘Dirt Cheap’ UK Assets, Emerging Markets
Representatives for Allfunds didn’t respond to a request for comment when contacted by Bloomberg News. Covestro AG declined to comment.
Smaller companies in particular have been attracting attention given their valuations slid substantially amid persistent outflows from UK equity funds, according to Ken Wotton, Gresham House Plc’s managing director for public equity. The extreme, once in a generation kind of discount, has been noticed by cash-rich private equity firms and strategic corporate acquirers, Wotton added.
“This has driven a steady stream of announced takeover approaches and, in some cases, public bidding wars have ensued,” Wotton said.
There have been 14 takeover offers for UK firms with a market capitalization of at least £100 million ($126 million) this year. Among notable deals, Nationwide Building Society is buying Virgin Money UK Plc for £2.9 billion, while International Paper Co. is in talks to acquire DS Smith Plc and Barratt Developments Plc has agreed to buy rival Redrow Plc.
Investors are also keeping an eye on Allfunds, which Bloomberg News reported on Monday has drawn interest from investment firm Motive Partners. This follows a Bloomberg News report from last November that the fund distribution platform was gauging takeover interest from private equity firms. Expansion has reported that Euroclear and Brookfield are among interested suitors.
Read more: UK Takeover Targets Ask for More Despite Best Premiums in Years
A flurry of companies that went public since the start of 2020 have fielded buyout offers, and investors have speculated that Allfunds could be next as its shares trade 40% below its 2021 IPO price of €11.50. Of the IPOs in Europe that raised over $100 million each since 2020, more than 20 have drawn M&A interest, according to data compiled by Bloomberg.
Covestro, a German chemicals maker, was the second-most mentioned. Bloomberg reported in February that talks between the company and Abu Dhabi National Oil Co. were ongoing, though a deal has yet to materialize.
There’s optimism that dealmaking activity in Europe will rebound this year as conditions improve, especially as monetary policy eases and global private equity firms look to splash their cash. There have been almost $43 billion worth of pending and completed deals targeting listed European companies so far this year, with the UK accounting for around $17 billion, or 40%.
George Holst, head of corporate clients at BNP Paribas SA, is gearing up for a particularly busy quarter for M&A in Europe.
“The second quarter will be both very interesting and rich in terms of deals in Europe as it’s a last window before US elections dominate the end of the year,” Holst said.
--With assistance from Michael Msika.
(Adds in 8th paragraph Bloomberg News latest report on Allfunds, updates prices throughout.)
Most Read from Bloomberg Businessweek
How Bluey Became a $2 Billion Smash Hit—With an Uncertain Future
Everyone Is Rich, No One Is Happy. The Pro Golf Drama Is Back
©2024 Bloomberg L.P.
