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New wave of takeover activity lifts UK market

by LLB Editor
2nd Aug 21 2:32 pm

The UK takeover spree continues to move at pace, with yet another FTSE 250 stock receiving a bid,” says Russ Mould, investment director at AJ Bell.

Aerospace and defence components group Meggitt has become the latest target for an overseas buyer, and one pitched at a very generous 70.5% premium to last Friday’s closing market price.

“The bid for Meggitt, together with well-received numbers from HSBC and chatter about a potential counterbid for Morrisons, helped to push up the FTSE 100 by 0.9% to 7,096. UK stocks have long been considered cheap and this year’s M&A spree shows that overseas investors have finally got enough confidence to pounce on opportunities after years of showing little interest in the market.

“With a 6% gain, the top FTSE 100 riser was Melrose Industries on positive read-across from Meggitt given it also has interests in the aerospace and defence sector, having bought GKN in 2018. It would be interesting to see if this predator becomes prey, as Melrose has historically been the one doing the bidding.

“The FTSE 250 hit a new record high of 23,305 as its cohort of mid-cap stocks is seen to be better hunting ground for takeover targets than the large cap FTSE 100 index. Existing FTSE 250 bid target Sanne received an offer from private equity group Apex at 920p per share, having previously been subject to 830p, 850p and 875p per share offers from Cinven.

“We’ve seen quite a few private equity suitors having to raise their offers this year as companies and shareholders push back on initial approaches, saying they are too low. Private equity firms have a reputation for trying to get a bargain, but their tactics have been fully exposed this year and it now seems rare for the first offer to be the winning one.”

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