How YOU can cash in on the stock market feeding frenzy
City experts pick TEN British firms ripe for takeover bids that could send shares soaring
THEY have been described as sitting ducks: UK-listed companies that ought to be more highly valued and are therefore ripe for being picked off by cash-rich foreign predators.
For private investors, selecting the right takeover target can mean a quick profit, as bidders normally have to pay well above the current share price to win control.
And the bids are coming thick and fast with every few days seeming to bring a new swoop on an unloved stalwart of the London stock market.
Charles hall, head of research at investment bank Peel hunt, has described the ‘relentless’ merger and acquisition (M&A) activity as a ‘feeding frenzy’.
It has led to much soul-searching in the City about why Britain cannot keep hold of the companies that make the country tick. And industry sources suggest the dealmaking seen so far this year is just the tip of the iceberg – with far more to come.
It is bad news for the Square Mile but for investors, however, there can be a big reward. The price paid last year by bidders was 51pc higher than the shares were trading before the deal was announced, according to broker AJ Bell.
That might seem like rich pickings for anyone who can spot a sitting duck – and turn it into a golden goose.
But watch out, says AJ Bell investment director Russ Mould.
‘Buying a stock purely in the hope of a bid is not a good idea,’ Mould warns.
‘A better plan is to focus on the key fundamentals that make any stock potentially attractive.’
here are ten firms that City experts believe may become takeover targets – presenting a potential opportunity for investors.
UNILEVER VALUE: £105bn Shares down 21pc since peak in September 2019
A BID for the consumer goods giant would be a seismic event on the stock market. Fund manager nick Train, one of Britain’s leading stock pickers, believes it will take the shock of a mega-deal like that to make investors realise how undervalued the FTSE 100 is. And Unilever – home to some of Britain’s bestknown brands from Marmite and hellmann’s to Dove and Domestos – is cheap in comparison to many of its global competitors.
A ‘poor share price performance’ alongside its ‘good brands’ make it a potential takeover target, according to Mould.
ASOS VALUE: £426m Shares down 95pc since peak in March 2018
POPULAR among Gen Z and millennials, Asos shares soared during lockdown as shoppers flocked online. But as high interest rates and inflationary pressure bite, the company has again fallen on tough times. With shares down 95pc since their peak, Garry White, chief investment commentator at Charles Stanley, says Asos is now ‘vulnerable to a bid’.
BURBERRY VALUE: £4.2bn Shares down 56pc since peak in April 2023
FROM high Street to high-end fashion, Burberry is also seen as fair game for bargain hunters. Shares have more than halved in the past year as the famous trench coat maker falls out of fashion in the City amid weak demand for luxury goods in China. Abrdn investment manager Sasha Kachanova says it ‘remains a potential takeover target particularly at its current valuation’.
PRUDENTIAL VALUE: £20.9bn Shares down 54pc since peak in January 2018
IT is not just Burberry that is feeling the heat from an uncertain Chinese economy.
Prudential, which was founded in the UK in 1848, left the British insurance market in 2019 to focus on fast-growing Asia. But Richard hunter at Interactive Investor says its exposure to China and dwindling share price may make it prime for a takeover.
DUNELM VALUE: £2bn Shares down 29pc since peak in October 2020
DUNELM started life in 1979 as a curtain-selling market stall in Leicester, run by Bill and Jean Adderley, and is now one of the UK’s biggest homeware retailers.
Susannah Streeter at hargreaves Lansdown says the slump in the share price since late 2020 makes Dunelm a target for companies looking for a cheap win.
ENTAIN VALUE: £5bn
SHARES down 67pc since peak in September 2021
SHARES in Ladbrokes and Coral owner entain have been under pressure for a while as the UK pushes ahead with tighter gambling regulation, including limits on the amount punters can bet.
The group has also been plagued by boardroom uncertainty since its chief executive Jette nygaard Andersen made a shock exit last year. US rivals MGM Resorts and Draft Kings have both had takeover offers knocked back.
And with recent reports suggesting private equity titans Apollo and CVC Capital are interested, Mould reckons the company remains in the frame.
DR MARTENS VALUE: £748m Shares down 85pc since peak in February 2021
DR Martens shares plunged to a record low last month after it issued its fifth profit warning in three years amid weak demand in the US and rising costs. White reckons it could now be ripe for a takeover.
‘A large US brand with a good distribution and marketing network may find the iconic bootmaker a good fit,’ he says.
REVOLUTION BEAUTY VALUE: £82m Shares down 85pc from peak in August 2021
MAKE-UP firm Revolution Beauty has been in the doghouse since auditors at BDO refused to sign off on its financial accounts for the year to February 2022. This led to shares being suspended on the London Stock exchange for nine months. But Wayne Brown, head of consumer research at broker Liberum, says the company is on more ‘solid footing’.
Because of this, he says the firm looks ‘very cheap’, and speculation is mounting that it could be in play before too long.
STANDARD CHARTERED VALUE: £19.4bn Shares down 59pc since peak in November 2010
STANDARD Chartered boss Bill Winters recently admitted the bank’s share price performance has been ‘c**p’.
Analysts at AJ Bell believe the lender – which operates in China, hong Kong and Singapore – could be a target because of its knockdown share price.
In January last year, it was reported that First Abu Dhabi Bank had hired advisors to work on a takeover, then walked away from the deal. Reports suggest other suitors from the Middle east, possibly Abu Dhabi or Saudi Arabia, are eyeing a move.
MARSTON’S VALUE: £178m Shares down 92pc since peak in February 2007
VICTORIA Scholar, head of investment at Interactive Investor, cites Marston’s as a potential target. In 2021, the group snubbed a £666m approach from private equity. At the time it said it significantly undervalued the firm, which started out over 180 years ago and has 1,400 pubs.
Marston’s, which brews Pedigree, hobgoblin and Lancaster Bomber beer, is worth just a fraction of that.