Experts Warn of Potential Takeovers and Delistings
Industry experts have issued a warning that more British companies could fall prey to takeovers and be removed from the London stock market. This comes after a year-long drought of deals, but a recent surge in takeovers with knock-out premiums to share prices has raised concerns about undervalued London companies. Bankers have highlighted the vulnerability of UK small cap valuations and the potential for more companies to become takeover targets.
Hotel Chocolat and City Pub Group Announce Takeovers
Two notable takeovers were announced recently, involving Hotel Chocolat and City Pub Group. Hotel Chocolat, owned by Angus Thirlwell, agreed to sell itself to US chocolate giant Mars for a 170% premium at £534 million. City Pub Group, run by Clive Watson and father of Made In Chelsea star Lucy Watson, sold for £162 million, representing a 50% premium, to brewer and pub chain Young's. These premiums indicate the undervaluation of these companies prior to the takeovers.
Experts Highlight Undervaluation of London Companies
Richard Bernstein, CEO of fund manager Crystal Amber, warned that there are many other undervalued companies in London that could become targets for takeovers. He emphasized that if a company like Mars sees value in a business like Hotel Chocolat, then it is indeed valuable. Dr Naaguesh Appadu, research fellow at Bayes Business School, described the premiums offered in these takeovers as a "steal" compared to the companies' previous trading prices. Susannah Streeter, head of markets at Hargreaves Lansdown, expressed concerns about an exodus from London as a result of these takeovers.
Expectation of Increased Takeovers in 2024
Banking sources have indicated that after a period of inactivity, there is behind-the-scenes work taking place that will lead to a flurry of takeovers in 2024. This suggests that more British companies may face the risk of being taken over and delisted from the London stock market in the near future.
Call for Urgent Reform of Pension Fund Investments
City big-hitters have sent a letter to Chancellor Jeremy Hunt, urging him to implement urgent reform of pension fund investments in UK companies. They argue that the dwindling investment in British business starves companies of financing, diverts taxpayer support to non-domestic companies, and impacts the markets. The letter emphasizes the need to drive liquidity into UK companies to increase their valuations and make them less vulnerable to takeovers.
Burberry Shares Fall as High-End Shoppers Reign in Spending
Burberry, the designer trenchcoat-maker, saw its shares drop by as much as 10% as it warned of a slowdown in high-end shopper spending. The luxury industry has been affected by China's sluggish recovery from the pandemic and a dip in US demand. Burberry stated that it is unlikely to meet profit expectations this year, citing cost-of-living pressures and high inflation as factors impacting consumer caution. This indicates that even wealthy shoppers are feeling the effects of the economic challenges.
Ofwat Investigates South East Water as Worst Performer
Regulator Ofwat has launched an investigation into South East Water, ranking it as the worst performer for water supply interruptions in England and Wales. The company, which serves 2.2 million customers, has faced issues with water shortages, leading to weeks without water in some homes and the closure of schools. Ofwat stated that customers have been "failed too often" by the company's performance.
Mortgage Rates Below 5% Offered by Multiple Lenders
In a significant development for homeowners, several lenders have slashed their mortgage rates below 5%. Halifax, HSBC, Yorkshire Building Society, Virgin Money, and Bank of Ireland are all offering new two-year fixed rate deals under 5%. This comes as lower inflation figures have raised hopes of the Bank of England lowering interest rates by next spring. Lenders are confident that they can become more competitive on home loans without risking financial loss.
Outgoing BT Boss Calls for Permanent Tax Incentives
Philip Jansen, outgoing CEO of BT, has called on Chancellor Jeremy Hunt to make tax incentives for firms permanent in order to encourage investment. BT is investing £300 million annually in its fiber network rollout and has credited tax incentives like full expensing and super deduction for their critical role in supporting these investments. Jansen emphasized the importance of driving investment in the country to secure billions of pounds of potential investment.
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