It has been a great year for British M&A bankers. A record amount has been spent by foreign companies buying British peers including Softbank’s acquisition of ARM and InBev’s deal to buy SAB, the largest takeover deal in UK history. And as 2016 winds down, the deals are still coming. Two weeks ago Fox made an offer to purchase the rest of the Sky shares it doesn’t already own.
If the value of the pound remains depressed and the UK economy continues to show resilience, this deal spree could last into 2017 and there are some companies that look to be prime targets for overseas buyers.
Opportunistic bid
Fox’s offer to buy Sky has rekindled speculation that a bidder will swoop on ITV (LSE: ITV). ITV is no stranger to takeover speculation, every few months a rumour goes around that a suitor is eyeing up the business. However, this time the environment looks right for an offer to be made.
Due to concerns about the sustainability of ITV’s advertising revenues in a weak market, shares in the company have lost a quarter of their value of the past year. A few weeks ago the shares were down by as much as 40%. It’s these declines that are likely to attract a long-term buy who’s not interested in short-term market trends. After these declines, the shares are trading at a forward P/E of 11.9 and yield 3.7%.
Second time lucky?
Luxury fashion retailer Burberry (LSE: BRBY) has already fended off one possible suitor this year and could find itself attracting bid interest once again during 2017. At the beginning of December, it emerged that Burberry had rejected multiple takeover offers from US handbag maker Coach.
There’s a chance Coach could come back with a higher offer for the UK fashion influencer next year, although if Coach fails to step up, there are plenty of other suitors out there. The weak pound has substantially devalued Burberry’s shares making it all the more likely an overseas buyer will swoop on the business. Shares in Burberry currently trade at a forward P/E of 19.7 and support a dividend yield of 2.5%.
The last of its kind
Severn Trent (LSE: SVT) is one of the UK’s last remaining publicly traded water companies and it’s likely to be only a matter of time before the company is brought out by a private equity business looking to generate long-term profits.
Severn’s shares have come under pressure recently as the bond proxy trade unwinds but these declines have only made the company more attractive to buyers. These declines coupled with the recent slump in the value of the pound may have made Severn too cheap for some buyers to pass up. The shares currently trade at a forward P/E of 20.8 and yield 3.7%.
