City spooked by record bids for FTSE 350 companies… but at least some boards are showing their mettle

The UK stock market has become a ‘happy hunting ground’ for predators as a record number of leading listed companies are subjected to takeover bids.

New analysis from broker Peel Hunt shows that 19 attempts to swallow up the FTSE 350 companies announced this year are still active or completed.

However, there are also signs that UK boards are less likely to switch to a buyer, as a growing number – such as Rightmove this week – reject offers they consider undervalued.

Charles Hall, head of research at Peel Hunt, said the growth in takeover attempts reflects “increased corporate appetite and confidence in the prospects for Britain”.

Among the biggest bids are the takeover of Hargreaves Lansdown for £5.4 billion by a private equity consortium and Czech billionaire Daniel Kretinsky’s bid to take over Royal Mail owner International Distribution Services for £3.6 billion.

Notable ‘getaways’ include Currys, which rejected a £750m approach from US hedge fund Elliott, and Rightmove, which this week completed a fourth £6.2bn bid from the Rupert Murdoch-backed Rea Group.

But the scale of the takeover frenzy means that companies representing 10 percent of the value of the FTSE 250 index could leave the index as a result of offers made in the space of just nine months.

Hall said: ‘The UK remains a happy hunting ground for both corporate and private bidders, due to low valuations and willing sellers, although there is a greater tendency to reject bids deemed too low.’

He added that the improving economic environment and easing of credit conditions made it “very likely that the high level of mergers and acquisitions (M&A) will continue.”

It is the latest evidence that the dismal performance of the UK stock markets has left many companies vulnerable to predators, including both sector rivals and private equity predators.

Peel Hunt’s research shows that 40 transactions have been completed so far this year, including shares listed on the junior Aim and small cap markets. Their value was £47 billion.

According to the report, buyers were attracted by the available valuations and sellers were lured by offers at an average 40 percent premium to the share price.

Foreign bidders represent 55 percent of the total, the report shows. Hall said major reforms are now needed ‘to maintain a healthy UK stock market’.

That includes tackling the amount of money available to invest ‘if Britain wants to retain its growth companies and ensure the stock market is able to provide long-term growth capital’.

Hall argues this could be achieved by shaking up pensions and individual savings accounts (ISAs) and a national wealth fund.

And he pointed to positive signals from the likes of Rightmove and Currys – as well as Direct Line and Anglo American – which have rejected bids.

“We are encouraged that boards are becoming more robust and recognizing the strategic value of the company and improving its economic prospects, rather than simply accepting a substandard offer,” Hall said.

Richard Bernstein, head of activist investor Crystal Amber, said: “It’s good news for shareholders that boards aligned with shareholders are becoming more robust.”