TWO takeover deals of stock market listed companies worth £3.7 billion neared fruition today, with analysts saying many more bids are likely as private equity funds hunt for cheap UK companies.
Payments provider Network International said this morning it had received a £2 billion, 387p a share offer from CVC Capital and Francisco Partners. That is 28% higher than the Friday closing price and much better than earlier rejected offers.
Meanwhile oil and gas firm John Wood said it will engage with Apollo Management on a £1.7 billion, 240p a share bid. It has turned down three lower offers but now seems keen to strike a deal.
A third deal could be in the offing, this one also involving Apollo. The Hut Group said it has received a “preliminary and non-binding proposal” for its shares from Apollo.
By some analysis US private equity funds are sitting on around $2 trillion of cash, nearly enough to buy the FTSE 100 in its entirety.
With UK shares unloved and new stock market floats thin on the ground, City watchers say more bids from private equity are likely.
They say fears of a banking crash have ebbed, but that shares remain cheap which will encourage further unsolicited bids.
Rebecca Burford, partner at Charles Russell Speechlys, said:
“While we did observe a bit of a slowdown in private equity last year, this followed a record year for dealmaking in 2021. The reality is that private equity has been going strong for quite some time and remained an attractive investment even last year. Private equity leading the way this year is not just down to opportunism and other dealmakers worrying about a banking crisis. Even without the concerns of a potential banking crisis, PE would still be booming.”
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, says top UK companies including Sainsbury, Jupiter Fund Management and Spire Healthcare could be vulnerable to a private equity bid since they have assets arguably worth more than their market capitalisation.
On Jupiter, he said: “Acquisition by a larger competitor can’t be ruled out, but it’s strong retail distribution network might also make it a target for private equity groups that are looking to increase their access to high-net-worth clients in Europe.”
Figures from the Quoted Companies Alliance show that the number of UK stock market listed companies has been falling for 20 years. There were 3273 listed companies in 2007, now there are fewer than 2000.
James Ashton of the QCA said: “Takeovers are part of the warp and weft of stock market life but the problem right now is we are not replacing leavers with sufficient new joiners.”
Shares in Network International jumped 57p to 360p, still below the value of the offer, suggesting some scepticism that a deal will go through.
The company’s shares have struggled since 2020, when investors became concerned about its acquisition of African rival DPO Group over links with Wirecard, the German payments giant that imploded due to an accounting scandal.
John Wood shares rose 15p to 227p.
Wood Group said: “Having now weighed all relevant factors, particularly feedback received from Wood shareholders, the board has decided to engage with Apollo to see if a firm offer can be made on the same financial terms as the final proposal.”
THG shares jumped 30p to 96p on the news. The battered stock was nearer 800p back in early 2021.
