Does the BT share price make the firm a takeover target?

Rupert Hargreaves explains why the BT share price has been rising this week, and why investors could be disappointed.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The BT (LSE: BT.A) share price jumped yesterday as investors speculated that the company is in the crosshairs of a potential acquirer. 

There has been speculation BT could be a takeover target since the French telecoms peer Altice, run by billionaire Patrick Drahi, acquired a 12.1% stake in the business back in June.

Since then, there has been no further movement from either party. That was until yesterday when BT announced it had appointed advisory firm Robey Warshaw.

Should you invest £1,000 in BT right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT made the list?

See the 6 stocks

Takeover defences 

This firm has a strong track record of helping companies navigate takeovers. It was involved with Pfizer‘s aborted bid for AstraZeneca in 2014 and Sky’s takeover by Comcast in 2018. Based on this track record, I can see why investors are getting excited.

Altice has made a commitment not to initiate a takeover until 10 December. After that date, the group can make an offer if it sees fit. 

Unfortunately, I think the chances of a takeover are pretty low. There are a couple of reasons why BT may be a difficult pill to swallow. 

For a start, any acquirer would be lumped with the company’s huge pension scheme and its multi-billion pound deficit. On top of this, any move would surely attract government scrutiny considering BT’s role in operating the country’s telecommunications infrastructure.

The group has also made a significant pledge to expand fast fibre internet across the country. Regulators would likely want assurances that any potential acquirer would maintain this expensive commitment. 

All of these factors are enough to convince me that Altice won’t make a full offer for BT, at least not in the near term. 

BT share price opportunity 

BT is also in the middle of a major management shake-up. Its new chairman, Adam Crozier, is due to start at the beginning of December. This could delay any potential takeover. 

Having said all of the above, Altice could be attracted to BT’s low share price. Even though the stock has risen more than 40% from its 2020 low of around 100p, it is still down around 64% from its five-year high of 391p. The allure of a bargain could be too much to pass up for the French telecoms group. 

I have been involved with enough takeovers to know that buying a stock just because it is a target is never a sensible decision. Instead, I like to focus on company fundamentals.

With BT, I am encouraged by the company’s recent efforts to grow its operations and improve customer service. I also think the stock is trading at a discount valuation right now. Some investors might argue this valuation is justified considering BT’s sluggish growth rate. I can see the point, but the firm is investing for growth. This spending should pay off in the long run.

As such, while I do not think the company will succumb to a takeover offer, I would buy the stock for my portfolio today. 

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in BT right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Here’s the Tesco share price forecast for the next 12 months!

Tesco's valuation has dropped to multi-year lows after recent share price weakness. Is now the time to consider buying the…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: March’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

I asked ChatGPT for the best FTSE 100 investment trust to buy… here’s what it said

There aren't many FTSE 100-listed investment trusts and according to ChatGPT there’s only one winner. Dr James Fox explores.

Read more »

Investing Articles

How much should investors put in an ISA to achieve the average UK wage in passive income?

Millions of Britons use the Stocks and Shares ISA as a vehicle to build wealth, but a successful investor can…

Read more »

Investing Articles

2 cheap FTSE dividend stocks to consider buying for an ISA

The deadline for using up the Stocks and Shares ISA allowance is almost upon us. Paul Summers has spotted two…

Read more »

Investing Articles

£20k in a Stocks and Shares ISA? Here’s how an investor could target £1,342 in passive income each month

Christopher Ruane explains how a long-term approach to investing a Stocks and Shares ISA could generate a four-figure monthly income.

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

Millions are missing out on ISA account benefits! Here’s what I’m doing now

Swathes of people are missing the chance to supercharge their returns with a Stocks and Shares or Lifetime ISA account.…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Here’s my plan to survive and thrive in a stock market correction

A falling stock market can be an opportunity, but investors need a plan. Stephen Wright shares his strategy for taking…

Read more »