British companies have been labeled “easy targets” as foreign predators seek takeover bids in London.
The attack on Anglo American – the second FTSE 100 company to receive a takeover bid this year – has sparked speculation about which company will be next.
City analysts believe vulnerable blue-chip stocks include BP, Unilever, BP, Reckitt Benckiser, Standard Chartered, Entain and Burberry (whose securities are listed above).
Other targets include names such as Dr Martens and Aston Martin, according to AJ Bell, who said the companies are threatened mainly because they are undervalued in the UK market but have strong brand value.
Dan Coatsworth of AJ Bell said: “Publicly, these companies may give the impression that all is well, but behind closed doors management may worry that they are easy targets for bargain-hunting predators.”
City analysts believe vulnerable blue-chip stocks include BP, Unilever, BP, Reckitt Benckiser, Standard Chartered, Entain and Burberry.
Susannah Streeter, an analyst at Hargreaves Lansdown, said predators look to larger companies for immediate returns on their investment.
“Overseas buyers are still likely to stay further away from growth stocks that offer the promise of jam tomorrow and focus on those that offer jam today in terms of solid earnings,” he said.
Abrdn investment manager Sasha Kachanova said: “Burberry remains a potential acquisition target, especially at its current valuation.”
The speculation comes as FTSE 250 music label Hipgnosis is at the center of its own bidding war.
The group, which owns the song catalogs of artists including Beyoncé and Blondie, yesterday backed a bigger bid from rival Concord, valuing it at £1.2bn.
It previously backed a separate bid from private equity titan Blackstone. But takeover disputes have become the norm.
Packager DS Smith, telecommunications company Spirent Communications and transport company Wincanton have all fallen into the hands of foreign bidders.
Insurer Direct Line and electricity retailer Currys have rejected recent approaches.
The sorry situation has led some experts to warn that the London stock market faces “death by a thousand cuts.”
In the City and Westminster there is growing concern about the lack of investment in UK shares, which has left them undervalued and vulnerable.
And some companies, including Flutter, which owns Paddy Power, construction supplier CRH and plumbing group Ferguson, are leaving London to list elsewhere, such as New York.
Another concern is the lack of companies entering the stock market through so-called initial public offerings.
In a report, Peel Hunt has warned that an index of UK small companies could disappear within four years in a “feeding frenzy”.
Brokers say the FTSE Small Cap will cease to exist if “relentless” M&A activity continues.
The index, made up of companies from the UK’s main market that are not big enough for the FTSE 100 or FTSE 250, has seen its numbers fall from 160 in 2018 to 114 last year. “If we extrapolate the current trend, the last company will leave in 2028,” the report says.
The prospect of a major company such as BP and Unilever being acquired prompted the intervention of one of Britain’s best-known stock pickers this week.
Lindsell Train’s Nick Train said this week that a bid for a “major UK company” could change investor sentiment about under-appreciated domestic shares.