Will Recent Declines Reignite Bid Interest For SABMiller plc, Diageo plc And ITV plc?

Are takeover offers for SABMiller plc (LON: SAB), Diageo plc (LON: DGE) and ITV plc (LON: ITV) on the cards?

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SABMiller (LSE: SAB), Diageo (LSE: DGE) and ITV (LSE: ITV) have all been the subject of takeover rumours this year. But so far, no potential suitor has moved to make an offer for the companies. 

However, the recent market turbulence has put pressure on SAB, Diageo and ITV’s valuations, making them cheaper for any would-be buyer. Indeed, over the past month ITV’s share price has by 11.6% while SAB’s market cap. has contracted by 12.8%.

What’s more, over the past six months SAB’s shares have fallen by 18.1% and Diageo has declined by 10.2%. More than £10bn has been wiped off SAB’s market cap. since the beginning of march. And SAB’s management is becoming concerned that these declines could inspire a would-be buyer to make a low-ball offer for the company.

Low-ball offer?

According to City analysts, SAB has recently hired two of the City’s most respected dealmakers to help bolster its defences against a £70bn takeover, around £43.00 per share.

Only a few months ago, a £70bn offer would have been rejected for being too low. Although, after recent declines, shareholders could be more inclined to accept such a deal. 

It’s rumoured that Brazilian private equity firm 3G Capital and AB InBev are weighing up a deal for SAB. 3G Capital already owns a third of AB InBev.

Also, it has been reported that the Brazilian private equity group could be weighing up a bid for Diageo. At the beginning of June, an unconfirmed report suggested that Brazil’s richest man and founder of 3G Capital, Jorge Paulo Lemann was investigating an offer for the company. 

A rough patch

Diageo has had a rough time lately. Falling sales within key markets have hampered the company’s earnings growth and overall growth has ground to a halt. However, lacklustre returns have made Diageo the perfect target for 3G, a cost-cutting specialist. 

Diageo’s own management doesn’t expect the company’s top line to begin expanding again until 2017. The company’s operating profit margin increased by 0.24% year on year during the first half of this year, and further margin growth is expected going forwards. From 2017 onwards, the group is planning to unlock another £500m from cost savings to reinvest in the business. 

Nevertheless, as Diageo’s shares have recently fallen to a 52-week low, the private equity company could be re-checking the numbers to see if it’s worth making an opportunistic offer. 

Opportunistic

Liberty Global, the owner of Virgin Media, has been steadily increasing its ownership of ITV this year, prompting speculation that the US media giant could be about to launch a full takeover of the company. 

At the end of July, Liberty made, what its management called an “opportunistic” investment in ITV, increasing its stake from 6.4% to 9.9%. The company then ruled itself out of the running to acquire ITV for the next five months with a formal notification under the UK Takeover Code.

Still, there’s nothing to stop Liberty coming back and making an opportunistic acquisition of ITV at the beginning of next year. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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