As Currys’ share price rockets, here’s another potentially hot UK takeover target!

Takeover news has driven Currys’ share price through the roof! Here’s another FTSE 250 share that Royston Wild thinks could attract buyer attention soon.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A young Asian woman holding up her index finger

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Things are starting to really heat up on the takeover front. FTSE 100 boxmaker DS Smith leapt last week after it confirmed rival Mondi was taking a look. And today (19 February), the Currys (LSE:CURY) share price has surged as talk of a potential bidding war for the retailer heats up.

The FTSE 250 firm has batted back a 62p per share takeover attempt from US investment firm Elliott Advisors, it announced today. It said that the deal — which would attribute a value of £700m on the electricals retailer — has “significantly undervalued” the company and its future prospects.

Also on Monday, Chinese e-commerce giant declared that “it is in the very preliminary stages of evaluating a possible transaction that may include a cash offer for the entire issued share capital of Currys“.

How high will it go?

At 63.75p, Currys’ share price has surged by 35% in start-of-week business. But it still trades around 15% more cheaply than it did 12 months ago.

The electricals giant has struggled more recently. This reflects depressed consumer spending in its UK, Scandinavian and (soon to be divested) Greek operations. But the company remains a market leader and still has considerable long-term potential.

In fact, one of Curry’s largest investors have put a price tag of 75p per share on the business, Sky News reports. This would value the firm at around £800m.

Another takeover target?

With many UK shares trading at big discounts, I expect takeover activity to continue to accelerate. One FTSE 250 share I think could attract the interest of suitors before long is QinetiQ (LSE:QQ.).

As the chart shows, this defence stock has been rising sharply since the end of 2023. And it could continue rising should the worsening geopolitical landscape keep driving arms spending northwards.

Yet at 378p per share, the company — with its forward price-to-earnings (P/E) ratio of 12.8 times — carries a lower valuation than other industry heavyweights, and especially those in the US. This makes it look very attractive on paper.

In descending order: Northrop Grumman, RTX Corportation, Lockheed Martin and BAE Systems. Chart by TradingView

QinetiQ, which has a £2.2bn market cap, is a master in the field of advanced robotics and drones. These technologies are playing an increasingly important role in the way wars are fought, as the UK firm’s January trading update showed: for the nine months to December it booked a whopping £1.35bn worth of orders.

Encouragingly for the company, industry experts expect demand for this sort of hardware to continue soaring, too. Spherical Insights & Consulting analysts expect the military drone market to grow at an annualised rate of 11.9% during the decade to 2023.

Balance sheet strength

QuietiQ may also become a takeover target thanks to its impressive financial standing. Cash generation remains strong and came in “significantly above” 100% in the December quarter, it said last month.

Net debt to EBITDA, meanwhile, remains super low and stood at just 0.9 times as of September 2023.

I believe QinetiQ might become one of the hottest takeover targets in the UK. But whether or not this scenario transpires, I’d be happy to add it to my portfolio today.

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.

Royston Wild has positions in DS Smith. The Motley Fool UK has recommended BAE Systems, DS Smith, Lockheed Martin, and QinetiQ Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Here’s what dividend forecasts could do for the BP share price in the next three years

I can understand why the BP share price is low, as oil's increasingly seen as evil. But BP's a cash…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

This FTSE 100 Dividend Aristocrat is on sale now

Stephen Wright thinks Croda International’s impressive dividend record means it could be the best FTSE 100 stock to add to…

Read more »

Investing Articles

3 shares I’d buy for passive income if I was retiring early

Roland Head profiles three FTSE 350 dividend shares he’d like to buy for their passive income to support an early…

Read more »

Investing Articles

Here’s how many Aviva shares I’d need for £1,000 a year in passive income

Our writer has been buying shares of this FTSE 100 insurer, but how many would he need to aim for…

Read more »

Female Doctor In White Coat Having Meeting With Woman Patient In Office
Investing Articles

1 incredible growth stock I can’t find on the FTSE 100

The FTSE 100 offers us a lot of interesting investment opportunities, but there's not much in the way of traditional…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

With an £8K lump sum, I could create an annual second income worth £5,347

This Fool explains how a second income is achievable by using a lump sum, investing in stocks, and the magic…

Read more »

Investing Articles

Here’s what dividend forecasts could do for the BT share price in the next 3 years

With the BT share price down so low, the dividend looks very nice indeed. The company's debt is off-putting, though.…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

28% revenue growth per year and down over 20% in price! Should I invest in this niche FTSE 250 company?

Oliver says this FTSE 250 company has done an excellent job bringing auctioning into the modern world. Will he invest…

Read more »