Predators circle UK blue chips as merger mania grips the City
Now ITV, Burberry and TalkTalk tipped as targets
INVESTORS are braced for a rush of mega-deals in the coming months as exuberance in the US stock market spills over into Britain.
North American companies have splashed out £37bn this week alone – snapping up broadcaster Sky, gold miner Randgold Resources and Italian fashion house Versace.
It takes the value of global deals to £2.5 trillion so far this year – 40pc higher than the same period last year and on track to beat the all-time record set in 2007.
With the appetite for mergers at its highest level since the financial crisis, analysts believe suitors are eyeing a string of UK companies including ITV, Burberry, Talk Talk and Hammerson.
Russ Mould of investment company AJ Bell said: ‘Given the rush of deals in the UK in 2018 – the busiest for mergers and acquisitions involving FTSE 100 firms since 2007 – investors could be forgiven for trying to identify the next potential takeover target.’
US media group Comcast won a two-year bidding war for Sky last weekend when its £ 30.6bn offer trumped the £ 26.9bn tabled by Rupert Murdoch’s 21st Century Fox.
The Sky deal on Monday was followed by the proposed takeover of London-listed Randgold Resources by Canadian rival Barrick Gold for £4.6bn. And US fashion group Michael Kors yesterday agreed to buy Versace for £1.6bn.
Analysts believe the combination of surging US confidence and a weaker pound could see fresh action in London as buoyant foreign businesses try to buy British assets on the cheap.
Ben Kelly of stockbroker Louis Capital Markets said: ‘ We have Brexit approaching an end-game, and acquirers are happy to take advantage of the weak pound to pick up assets.’
ITV is considered a top target thanks to its successful production arm, ITV Studios. It is the majority owner of World Productions, maker of the BBC’s Bodyguard, which just sold international rights to the hit show to Netflix for a rumoured seven-figure sum.
Neil Wilson of trading firm Markets said: ‘The obvious question is who’s next in European media and the equally obvious answer is ITV. If US giants are looking for merg- ers and acquisitions in Europe, then ITV looks relatively cheap.’
Other FTSE 100 stalwarts potentially in the firing line include luxury fashion house Burberry. Mould also believes the banking industry could also be fertile ground. Small lenders Aldermore and Shawbrook have been taken out in the past 13 months, and the owners of Yorkshire Bank are buying Virgin Money for £1.7bn.
Mould said that Onesavings Bank could be next in line due to solid growth in its loan book.
He also tipped shopping centre owner Hammerson, which was forced to ditch a £3.4bn bid for rival Intu due to shareholder opposition, before fighting off a takeover attempt by France’s Klepierre. Talk Talk could be snapped up too amid a battle for supremacy among telecom companies.
Mould said: ‘The bid for Sky and the merger between Barrick Gold and Randgold Resources shows that the combination of a weak pound and the prospect of higher interest rates is persuading predators to make their move while conditions are optimal.’