British mid caps are learning the value of turning down offers from potential buyers. That is a welcome change
Matthew Lynn City columnist
The fate of Britvic, the soft-drinks maker, hangs in the balance. The company has firmly rebuffed three offers from the brewing giant Carlsberg, and its share price, perhaps not surprisingly, is already up by almost 40% since the start of this year. Earlier this week, Pepsi said it would not stand in the way of a change of control, a significant concession as Britvic distributes its products in the UK. Carlsberg may well come back with a higher offer, perhaps as early as this week. The important point, however, is this. Britvic did not simply accept the firs, or indeed the second offer, that came along. It has been holding out for a higher price, and arguing the case for an independent future.
We have been seeing more and more of that among medium-sized British firms over the course of this year. The sale of Hargreaves Lansdown has been running for months, and the stockbroker finally looks set to be sold to private-equity firm CVC, but only after turning down the first offer and insisting on more money. Even now, some of its major shareholders are publicly demanding the board hold out for a higher price, or else reject a takeover completely.
Earlier this year, the electrical chain Currys also turned down multiple offers from the US buyout house Elliott, as well as approaches from Chinese retailer JD.com, and remained independent. Insurance company Direct Line likewise turned down offers from its Belgium rival Ageas, arguing that neither genuinely reflected the value of the company. The UK’s medium-sized companies are increasingly finding the courage to say no to offers to buy them out. That is a welcome change.
There are three reasons for it. First, share prices typically rise after a rejected bid. Direct Line’s, for example, shot up from 160p to 220p when the first bid was announced, and although they slipped again slightly once the deal fell through, the price has held above 200p, and the value of the company has risen by 55% over the last 12 months. Likewise, Currys’s shares stayed higher after the bid fell through, and remain 45% up over the last year. Bidders may have reasoned in the past that management would be worried about the shares tanking if the company was not sold, and could use that to hustle a deal through at a cheap price. But that tactic is not working any
