This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
A merger or takeover bid from out of the blue is the dream for every retail investor. One of your holdings, that you have backed for a long time, is the subject of a bid from a larger rival or a foreign entity, maybe even a young upstart looking to become a big-league name.
The shares of a company that’s reportedly under offer can jump immediately and, with the average premium paid on the share price topping 30% since 2013, it can provide you with a very healthy profit.
But why leave it to chance? Why live in hope that one of your holdings will lay prey to a big chunky bid from an industry giant, instead of hunting for the opportunity yourself?
While my Head of Research today wrote an insightful piece on the Kraft-Heinz and Unilever takeover bid, which resulted in Unilever rallying as much as 15% this afternoon, I’ll look at getting your M&A strategy into full swing by focusing on 2017’s largest deals and speculations that have already moved markets only 7 weeks into the year.
Most recently, Reckitt Benckiser’s takeover of Mead Johnson on 2 February saw share prices of both companies rally (RB by 5%, Mead by 20%) – a rarity in M&A – as Reckit increases its product base. Only five days earlier, Tesco and Booker confirmed that they would merge to create the UK’s largest food retailer, seeing yet another predator rallying as Tesco jumped 13% while Booker was 20% higher on the day. ITV, after a host of rumours in 2016, was put back under the spotlight after the Evening Standard reported that US media giants Amazon, Apple and Netflix could be considering a 300p per share offer. ITV’s share price rallied as much as 10% in the space of a few hours as a result.
Finally, whilst being a little beyond our timeline, it’s still worth mentioning the 21st Century Fox takeover bid for Sky, given that it too is a UK 100 stalwart under offer from a US rival. Shares jumped an astounding 33% when the 1075p share offer was reported on 13 December. Could Sky and Unilever just be the beginning with the Pound still weak against its European and US counterparts?
But let’s hold on for a minute. I know what you’re thinking. ‘How could I benefit from this unless I already hold the shares?’ This is where we come in – in the majority of cases stocks will move off the back of the speculation of bids, not the resulting takeover.
This makes it so important for you to be kept aware of the latest stock market news in order to make the most of potential M&A chatter. At the moment, who is going to bring you this news? Your current broker? No? Well now is the time to do something about it.
Here at Accendo, we deliver breaking market news straight from the trading floor to our clients. Would you have purchased Unilever today off the back of the takeover news? Hopefully, but maybe not. Either way, you can never have too much info, and breaking news that can make you 15% in one afternoon is valuable, right?
Even better, wouldn’t it be useful to know which stocks are considered susceptible to future bids? This is where our trading research is second to none – with our ‘Merger and Takeover corner’ delivered to your inbox at 7.45am daily, complete with live updates throughout the day, you will be the first in the know and, hopefully, the first to react.
However, don’t just take our word for it – experience our service for yourself first hand: Sign up to our research and trading ideas here and receive the whole package, just as our clients would.
Happy hunting!
Tom Soanes, Trader, 17 February
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
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