ALEX BRUMER: UK assets are being snapped up by foreign buyers at a cheap price

FTSE’s bargain basement: Foreign buyers are picking up valuable UK assets cheaply, says ALEX BRUMMER

Barely a week goes by without the discount in stock valuations on the London Stock Exchange (LSE) leading to a foreign takeover and shrinking of the overall size of the market.

Last week, minority shareholders approved the £10bn sale of software pioneer Aveva to France’s Schneider Electric.

It was followed soon after by German private company Saria’s attack on Scottish-based sausage skin maker Devro for £540 million.

National assets: company exit from the FTSE is part of a broader dialogue on the relative values ​​of the LSE and the Paris Stock Exchange

There are strong reasons why both deals are worthy of a political challenge.

The Aveva deal opens up the possibility of technology transfer at a time when the government wants the UK to become the next Silicon Valley.

That can never happen if the tech crown jewels Arm, Ultra Electronics, Meggitt, Inmarsat and Aveva, all with deep roots here, are thrown out with cursory research.

Similarly, it is hard to imagine the Scottish Parliament looking with any equanimity at the loss of a valuable group in the food supply chain to a privately controlled German company where visibility will be negligible.

The disappearance of companies from the FTSE, which boomed in the 1900s, is only part of a broader dialogue about the relative values ​​of the LSE and the Paris Stock Exchange.

Analysis by Refinitiv suggests that the data is more complex than presented.

The London market’s equity valuation may have fallen faster than Paris’s since 2020, but London’s IPOs and equity trading far exceed those in France.

Last year London recorded the second largest number of IPOs since 2007 and this year the LSE has seen 41 debuts worth more than £1bn in total, up from £410m in Paris.

A major difference between the two is the free float of stocks. Paris is dominated by luxury goods companies, such as LVMH, which is 50 percent controlled by the Arnault family.

In the French market, the free float is 70 percent for larger companies and 50 percent for smaller companies.

This is in contrast to the 90 percent free float in the City. This means that London is a much more liquid market and there are less rigid barriers to overcome for foreign and private equity bidders.

When it comes to dividends, London is a big winner, with payouts in the third quarter of this year of £23.9bn – more than seven times the payout on French equities.

Other factors explaining France’s current paper victory include the suspension of trading in London for dozens of billion-dollar Russian-controlled companies.

What is inescapable is London’s equities discount to other world markets. Since the 2016 Brexit referendum, that has grown to 35 percent.

Buyers like Schneider and the German Rethmann family may be paying a premium for languishing stock valuations.

But they still get control of valuable UK assets at bargain prices on Cyber ​​Monday.

Mixed bag

It’s a tradition to predict the worst holiday season ever for retailers.

The problems of niche players such as Joules and, in the latest trade, Superdry (-17.2%) may not reflect the broader market.

M&S, the better known M&S, is fairly bullish on the outlook, contrary to the suggestion of an inventory build-up. Inventory levels are below pre-Covid levels.

Indeed, Springboard’s most recent data, which measures visitor numbers, shows it was even 9.3 percent higher for all UK destinations on Friday, with shopping malls reporting a 16.8 percent increase from last year.

Sunday was also busy. In terms of shopping visits, the crisis in the cost of living is not yet making much of a difference.

A gloomier picture comes from the CBI, which says higher prices are “grinding at the consumer.”

An inflation rate of 11.1 percent is unavoidable. But the determination of some organizations to see everything through dark glasses remains undiminished. Remember all those locked up Covid savings?

Good to talk

Amid the union clashes, a bright spot for BT, which has reached a settlement for all but the highest paid.

The deal was made in partnership with the Communication Workers Union and is part of reforms aimed at £3 billion in cost savings by 2025.

Chief executive Phil Jansen should now focus on rolling out fiber broadband to your doorstep.

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