The FTSE 100 Index was today set to build on last week’s strength as the second private equity takeover tilt at Morrisons shone a light on the attractiveness of UK listed companies to foreign buyers.
US private equity firms have snapped up UK plcs at their fastest rate in two decades as Brexit has left their shares at a steep discount to the rest of the world.
The £9.5 billion Morrisons takeover highlighted the issue more than ever and has led to inevitable hand-wringing about the impact on the UK economy.
Today, the Financial Times highlighted how, since the takeover of defence giant Cobham by private equity group Advent 18 months ago, the US buyout giant has sold more than half the constituent parts, leaving Cobham with no UK manufacturing sites.
The businesses sold have continued to operate in the UK under their new owners but are no longer held by Cobham and, as former chairman Gordon Page points out, the major technologies Cobham once had no longer reside with UK owners.
Advent-owned Cobham is now bidding for Ultra Electronics, which is also seen as having cheap shares compared to its peers.
Defence companies often appear to be undervalued by the UK stock market, experts said, leading to them being taken over by US rivals.
For short term investors in the UK market, all this takeover activity merely represents a chance to make a fast profit from their investments. That leads them to play the “who’s next?” game and pile into similar companies as those being bid for.
Morrisons’ shares will inevitably rise to the new offer price of 252p-a-share today, but Sainsbury’s could also rise amid takeover hopes.
Amid all that, the FTSE 100 was expected to open 10.7 points up at 7131.5 by the futures markets, with the IG platform reporting 61% of traders were betting on it going higher than that.
Bitcoin was weak over the past 24 hours, losing 2% to $34,103. As ever, nobody knows why.