Booming UK takeovers: your shares have been bid for – what now?

The UK equity market has been buzzing with mergers and acquisitions (M&A) deals this year, with around £76 billion worth of them taking place so far already.

This presents lots of shareholders with lots of opportunities and choices to make, both about how they may vote on any bid and what to do with the take-home proceeds.

Investors receiving money from takeovers should ask if there are other shares that could give similar or better returns than the ones leaving their portfolio. They also need to decide whether to stick with the same sectors or change their portfolio by investing in different area.

It’s like a football manager during the transfer window deciding whether to replace sold players with new signings that have similar skills, or build a team with new strengths.

AJ Bell has analysed the top 10 biggest deals by value on the UK stock market year-to-date and identified other listed companies that are either direct rivals or are driven by similar market dynamics.

Nine of the top 10 takeovers are cash bids, with the exception being real estate group Segro, whose shareholders are being offered stock in US-listed industrial property group Prologis, alongside a partial cash alternative.

Upon receiving a takeover offer, investors can either wait to see if the bid completes and receive the proceeds or they can sell in the market before then and lock in any bounce in the share price following the takeover bid.

There are pros and cons to each route. It can often take months for a bid to wrap up, but you would receive the full amount. Alternatively, selling now risks getting a lower price than the takeover offer in exchange for getting cash up front and avoiding the risk of the bid failing.

Segro – Other companies in the same sector: Tritax Big Box REIT or LondonMetric

Segro is a FTSE 100 member and the £14 billion offer by Prologis is the biggest deal by value of any London-listed bid year-to-date.

While Segro is best known for its large warehouses, more recently it’s been the company’s involvement in data centres that has gained investors’ attention. Segro has become an alternative way for investors to get exposure to significant investment globally in AI infrastructure.

The closest peer on the UK stock market is Tritax Big Box REIT. Trading on 0.8 times 12-month forward book value, the company recently raised £350 million to expand its position in the data centre space. Tritax has form in capitalising on ‘hot’ areas of the property market, having previously been at the centre of the e-commerce boom with its logistics centres. LondonMetric is another big box provider but with minimal data centre exposure.

EasyJet – Other companies in the same sector: Jet2

EasyJet is set to fly off into the sunset assuming private equity firm Apollo gets the deal over the line. All signs suggest it’s going to happen, meaning EasyJet investors should weigh up their options now. This includes taking cash or an unlisted stake in the holding company.

While International Consolidated Airlines is the biggest UK-listed name in the sector, EasyJet has more in common with AIM-quoted Jet2. Both are low-cost operators that specialise in flights and packaged holidays.

Jet2 currently trades just below its pre-Covid levels at around 12 times forward earnings. The business has a good reputation for customer service. Near-term earnings are clouded by the Iran war and a higher oil price. The situation has created cost pressures for Jet2 and led to travellers leaving it to the last minute to book. Near-term earnings are forecast to dip, before picking up again for the year ending March 2028.

Tate & Lyle – Other companies in the same sector: Associated British Foods or Premier Foods

Tate & Lyle has been on a diet over the past two decades, having sold its sugar and golden syrup business in 2010 and then its bulk sweeteners and starches interests more recently. That left it streamlined as a business, tapping into trends for healthier, better tasting food and drink. It was too tasty for US-listed rival Ingredion to ignore, and a takeover bid was tabled earlier this year.

There are several names on the UK market with similar interests. One similar name is Associated British Foods, which trades on 13 times forward earnings, albeit it is a conglomerate of ingredients, grocery, sugar, agriculture and retail. This is more of an apples and pears replacement for Tate & Lyle than a like-for-like swap. Importantly, the Primark retail operations will be hived off next year. 

Another company in this category is Premier Foods, which trades on 12 times forward earnings and is an ingredients group with a twist. Best known for making Mr Kipling cakes, there is more to Premier Foods than meets the eye. It provides countless products that help to elevate home-cooked meals, from sauces and spices to flavourings and seasonings. Premier Foods has gone from being a zombie company drowning in debt to one reborn thanks to getting its finances in order, investing back in the business, and product innovation.

What about the other top takeovers?

There are several other insurance-related names on the UK stock market with similarities to Beazley including Hiscox, Conduit and Lancashire. There are lots of UK-listed companies with similar activities to Schroders, including M&G. 

The UK market has traditionally been strong in specialist engineers, so even after Rotork and Bodycote exit there are still several other mid- and large-cap names in this space. Relevant names include Spirax, Melrose and Renishaw.

Mitie has broad interests across the support services arena, with Serco a similarly diversified outfit. There isn’t a natural alternative to DCC on the London Stock Exchange. The same applies to Intertek, although direct rivals SGS and Bureau Veritas are listed in Switzerland and France, respectively.