Takeover frenzy grips City as predators go bargain hunting

The City was gripped by a fresh frenzy of takeover activity yesterday as cash-rich suitors hunted for bargains on Britain’s bombed out stock market.

Chemicals giant Elementis spurned a £755million approach, while estate agent Countrywide received another £103million bid and ‘internet-of-things’ firm Telit Communications rejected a £259million advance from private equity.

At the same time, technology firm IMI Mobile announced a £543million tie-up with US giant Cisco (see panel) and bosses at retirement builder McCarthy & Stone backed a sale of its business.

Experts said the weak pound and Covid-hit stock prices have made UK firms appear cheap to overseas buyers – sparking a string of bids that could lead to a fees bonanza

The offers came amid an already-dizzying amount of takeover activity – with bookmaker William Hill, insurer RSA and security firm G4S all targeted.

Experts said the weak pound and Covid-hit stock prices have made UK firms appear cheap to overseas buyers – sparking a string of bids that could lead to a fees bonanza for bankers and other advisers.

A City source close to one of the deals said: ‘This is pandemic plundering.’

Elementis, which started as a tea merchant in 1844 but is now one of the UK’s biggest chemicals businesses, said it had rejected a third approach worth £755million from US rival Mineral Technologies because it fell ‘significantly short’ of what the company was truly worth.

Its board unanimously rejected the offer, branding it ‘highly opportunistic’. Shares fell 2.4 per cent, or 3.1p, to 123.7p.

Telit too rejected a £259million takeover bid from private equity firm Dbay Advisors, saying it would ‘fundamentally undervalue’ the business. Its shares stayed flat.

And Countrywide said it was considering an improved offer from rival Connells of £112million, sending its stock surging 22.4 per cent, or 57p, to 312p.

IMI bosses lined up for £66m boost 

Windfall: IMI co founder Vishwanath Alluri will receive £37.5m for his shares

The bosses of British technology firm IMI Mobile are set for a £66million bonanza after US IT giant Cisco swooped.

Cisco – which is worth £141billion – is offering £543million or 595p per share for the business, which provides digital communication services such as video and text messaging to clients. An

d because top figures at IMI still own almost 13 per cent of the company, they will receive more than £62million if the cash takeover is approved. 

On top of this, the executive team stands to receive another £3.8million in ‘retention’ fees if they stay on.

The biggest winner will be board member Vishwanath Alluri, who co-founded the London-based firm with Shyam Bhat in 1999 and will receive £37.5million for his shares. 

Technology chief Bhat will receive £2.8million for his stock, as well as about £377,000 to stay on for at least one year. 

Jay Patel, chief executive since 2013, would receive £21.6million for his shares and another £2.3million for staying on for at least three years.

Chairman John Allwood stands to get £1.2million for his stock and finance chief Michael Jefferies about £80,000.

Retirement builder McCarthy & Stone backed an increased offer from private equity firm Lone Star worth £647million. Shares shot up 3.5 per cent to hover just below its suitor’s bid price of 120p.

Russ Mould, investment director at AJ Bell, said the average shares premium added by pursuers was 47 per cent for deals announced since October – underlining how overseas buyers view British shares as cheap.

‘If buyers feel they can still justify their purchase at that sort of premium, then they clearly think they are getting some kind of value, both financially and strategically,’ Mould said.

Stocks are being weighed down by Brexit uncertainty, he added, while sterling’s weakness against the euro means foreign firms can get more bang for their buck. 

And some bidders may also be choosing to pounce now in order to secure a lower price. ‘They may think now is a good time to act, as vaccines are rolled out and better times – and higher share prices – may lie ahead,’ Mould added.

In the past month, multi-billion pound takeovers of William Hill and RSA have been sealed, with talks continuing over swoops on broadband firm Talk Talk and video games maker Codemasters.

Goco, the owner of price comparison website Gocompare, has also backed a takeover by publisher Future and the AA has agreed to sell itself to private equity.

British chip maker Arm is in the process of being sold to US rival Nvidia for £30billion and Mike Ashley’s Frasers Group was yesterday racing to put together a last-minute rescue of collapsed department store chain Debenhams.

The flurry of takeover deals is likely to result in a fees bonanza for bankers, lawyers and public relations firms, who could potentially scoop tens of millions of pounds from the most lucrative deals.

This post first appeared on Dailymail.co.uk