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Could BT be taken over?

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Written by: Emma Lunn
25/08/2020
Shares in BT have rallied after it was reported that the company’s board was preparing to defend it against a potential hostile £15bn takeover bid.

According to Sky News, BT has asked Goldman Sachs to update its bid defence strategy against takeover approaches from industry rivals and buyout firms.

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.

BT’s share price jumped from 101.45p on Monday morning to 111.73p at the time of writing on Tuesday.

The telecoms giant’s value has fallen in recent years and now sits at just £10.7bn, the lowest level in a decade. So the belief that BT’s shares are under-valued will be a boost to its private shareholders.

Helal Miah, investment research analyst at The Share Centre, said: “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 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 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 restructuring that is much needed.”

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