3 Bid Targets That Could Soar This Year: Debenhams Plc, Rio Tinto plc And J Sainsbury plc


Even though Sports Direct has stated that it has no intention of making an offer for Debenhams (LSE: DEB) following another £85 million put-option bet on the retailer, bids from elsewhere could be a feature of 2015 for the department store.

A key reason for this is that Debenhams trades at a very low share price at the present time. For example, it has a price to earnings (P/E) ratio of just 9.6 and yields an impressive 4.6%, which indicates that a potential buyer would be acquiring the company at a very reasonable price.

Furthermore, Debenhams has a very lucrative and well-located estate, while its brand is extremely well known and could be developed internationally over the medium term. As such, a bid for the company this year would not be a major surprise.

Rio Tinto

Although Rio Tinto (LSE: RIO) (NYSE: RIO.US) is experiencing a challenging period at the present time, a bid for one of the world’s major iron ore producers seems to be rather likely. Of course, Glencore is probably the most obvious potential suitor, since it has in the past discussed the idea of acquiring Rio Tinto with the company’s board, although it would not be a major surprise for there to be interest from elsewhere.

That’s because Rio Tinto continues to have the world’s lowest cost curve for iron ore and, with China apparently on the cusp of a stimulus package, the low price of the commodity may not be a feature of the medium to long term. In addition, with Rio Tinto trading on a forward P/E ratio of 11.4 (which takes into account next year’s forecast fall in earnings) and having a yield of 4.8%, it seems to be too cheap for many of its peers to resist.


While a bid for Sainsbury’s (LSE: SBRY) (NASDAQOTH: JSAIY.US) has been talked about by investors for around 15 years, this could finally be the year when a bid is made. Certainly, Qatar Holdings may be the most obvious suitor (since it owns 26% of the company) but interest from elsewhere is likely.

That’s because the challenges facing the supermarket sector are likely to ease this year, with disposable incomes in the UK increasing for the first time in real terms since the start of the financial crisis. This could boost Sainsbury’s bottom line and provide investors with much more confidence in the outlook for the business.

And, with Sainsbury’s trading on a forward P/E ratio of just 11.9 (taking into account next year’s forecast fall in earnings) and yielding over 4%, it seems to offer excellent value and could be the subject of a bid approach this year.

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Peter Stephens owns shares of Debenhams, Rio Tinto and Sainsbury (J). The Motley Fool UK has recommended shares in Sports Direct. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.