Think UK Stocks Are Cheap? Try Buying a Whole Company

Foreign acquirers — mainly from the US — are targeting UK companies again. This time they’re being forced to pay up. Forget the apparent cheap valuations of London stocks when a handful of shares are traded. Buying an entire UK company means burning a hole in your pocket.

The first quarter of 2024 has seen a rash of eye-catching approaches. Connecticut-based GXO Logistics Inc. agreed to buy UK warehouse and transportation peer Wincanton Plc at more than double the stock’s pre-bid market price, trumping a rival offer agreed at a 62% premium. Keysight Technologies Inc. of California agreed to buy Spirent Communications Plc for an 86% premium, again elbowing aside another high-priced deal endorsed by the UK target.

Memphis-headquartered International Paper Co. has proposed buying DS Smith Plc at 48% above the packaging peer’s undisturbed share price, beating a competing proposal pitched at a more conventional one-third premium. Meanwhile, UK insurer Direct Line Insurance Group Plc succeeded in scaring off suitor Ageas SA despite the Belgian suitor’s opening shot being priced at a 43% premium and a small sweetener being added.

50% club

There’s a clear sense that things have picked up since Mars Inc. agreed to pay a 170% top-up to nab high-class confectioner Hotel Chocolat late last year. In the first quarter of 2024, announced UK bid approaches exceeding $500 million nearly matched the total for all 2023. Corporate buyers are leading the charge, whereas last year there was a notable spike in private equity-led activity. This isn’t just about buyout firms putting restless funds to work.