Three more London-listed companies announced takeover offers on Tuesday, pushing the value of deals that have taken firms off the capital’s stock market this year past $100bn, or roughly £74bn.
The Guardian led the coverage, and the FT and The Times reported the same wave of deals. Bodycote, the FTSE 250 engineering group listed in London since 1972, agreed a £1.84bn takeover by US private equity firm Veritas. The Macclesfield-based company, which provides heat treatment, metal joining and protective coatings to manufacturers, had been caught in a bidding war, and shares rose 4.5% after rival suitor CVC indicated it might counter. Gamma Communications, the telecoms firm, recommended a £1.1bn offer from UK private equity company Epiris, days after confirming talks with European buyout group Waterland. And Capricorn Energy, the Scottish oil and gas producer, is set to end 38 years on the FTSE all-share index after agreeing a $396m merger with Norway’s DNO, having switched its recommendation from a lower offer by Genel Energy.
The pattern across all three is the same. The acquirers promise what public markets allegedly cannot: patience. Veritas said Bodycote would gain “enhanced flexibility and long-term perspective”. Epiris made a near-identical argument about Gamma, saying a private company environment would let it invest and focus on sustainable long-term growth.
Russ Mould, investment director at AJ Bell, was blunter. “Overseas acquirers continue to feast on the UK market like hungry customers at an all-you-can-eat buffet,” he said. His concern is the cumulative effect: these deals further dilute the breadth and quality of a market already struggling to attract new companies to replace the ones it loses, with Bloomberg data compiled for the coverage putting this year’s exodus at almost $110bn including earlier deals.
The year’s running list reads like an inventory of British institutions: Segro, the warehouse landlord, agreed a £14bn takeover by America’s Prologis in July; easyJet accepted Apollo’s £5.7bn offer in August; and earlier in the year Schroders, the 200-year-old asset manager, agreed a £9.9bn takeover by a US investor. Each is individually rational for the shareholders being cashed out at a premium.
For the market as a whole the arithmetic is harder to defend. Pension funds and retail investors lose investable UK-listed breadth, the LSE loses listings revenue, and the political question keeps arriving unasked: what would have to change about the UK market’s valuation discount before companies choose to list here rather than leave. On Tuesday’s evidence, nothing has.