London-listed companies are being snapped up by bidders at a fair clip and I can see this increasing in 2021.
The latest bid is for gaming developer Codemasters. It has received an offer from US titan Electronic Arts. If accepted, holders will receive 604p per share. That’s a big improvement on the 485p recently offered by rival Take-Two. The fact that Codemasters’ price is already at 654p, however, suggests a counter-bid may be forthcoming!
This has made me wonder which UK shares might be next to receive bids. Here are three that spring to mind. But I’d never buy a share just in the hope of its being bought. These are all shares I think have strong appeal even without a takeover boost.
Sticking with gaming, Cambridge-based Frontier Developments (LSE: FDEV) could also be on larger players’ shopping lists. It’s the brains behind titles including Planet Zoo and Jurassic World: Evolution.
But Frontier wouldn’t be sold for peanuts. Thanks to the popularity of gaming during lockdowns, the shares have soared 155% year-to-date. This gives the company a valuation of £1.2bn!
If the battle for Codemasters tells us anything, however, it’s that overseas gaming giants will pay up to steal a march on competitors. Perhaps Chinese internet giant Tencent may wish to make a bid. It does already own almost 9% of Frontier.
Regardless of whether this happens, I wouldn’t be surprised if there’s further consolidation in the gaming industry in 2021. With eSports looking set to be one of the investing themes of the next decade, it’s surely only a matter of time before other UK shares get taken out.
Another firm that could find itself an opportunistic bid target before long is body-armour builder Avon Rubber (LSE: AVON). It’s a lot cheaper now than it was at the beginning of last week.
As fellow Fool Royston Wild covered in detail, Avon’s share price tumbled by 14% last Thursday on news that product approval relating to two contracts had been delayed. A protest had also been made relating to another contract.
As a one-time holder of the stock, I’d be sorry to see a firm like Avon acquired by an overseas bidder. Nevertheless, I can see the appeal. Here’s a high-quality firm in a niche market with bulletproof finances.
Regardless of takeover speculation on my part, I may need to seriously consider welcoming Avon back to my portfolio if it drops much further. The share price fell another 7% on Friday and now trades at just two-thirds of the valuation it had at the beginning of December.
No takeover talk is complete without mentioning FTSE 250 member ITV (LSE: ITV). The Love Island producer has had a target on its back since Sky was bought in 2018.
The attractions of ITV aren’t hard to fathom. In addition to its various channels, the broadcaster has its very successful Studios division. It’s also entered the streaming market with its BritBox offering as part of its digital transformation.
If a potential suitor wants a cracking deal, they need to show their hand soon. Should advertising revenue pick up in 2021 with dividends reinstated, ITV could be on its way back to the FTSE 100. The shares are already up 50% since early November!
If a deal happens, my money’s on telecoms company Liberty Global. It owns 10% of ITV already.