As shares more than halved over the last two years, potential takeover discussions raise the share price for the UK telecoms provider
BT shares leap amid talk of takeover
- According to Sky News, BT is now in the process of shoring up its defences against a takeover
- Any potential takeover will be seen as politically sensitive given BT’s central role in the UK’s communications infrastructure and coming at a time when the government is scrutinising Huawei’s involvement in the UK networks on ground of security
- The share price has made strong gains, up in excess of 5% at the open
This morning we note the strong gains in BT’s share price, up in excess of 5% at the open which follows on from a period of sustained weakness and the shares more than halving over the last two years. According to weekend media speculation (Sky News), BT is stepping up its defences against a takeover since the weakness in the share price brings forward the threat of potential bidders. No bidders have been identified but any potential bidder may be attracted by the fact that individual businesses such as Openreach are valued far higher than the sum of the parts of £10bn, with potential bidders coming from the private equity industry. Deutsche Telekom is also seen as a likely candidate given its 12% stake in BT following the deal several years ago for EE mobile network.
This speculation in some ways justifies current investor’s belief that the company is undervalued, but its current organisational structure suggests the share price will not appreciate to fair valuation anytime soon. The view among some is that if BT is to become a private company, it may be easier to restructure and unlock value than as a listed business. This does not help long suffering retail investors much, but this speculation may help in establishing a floor to BT’s share price and may give more impetus for management, and even the government/regulators in helping BT achieve that much-needed restructuring. We maintain our Hold recommendation.
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