City bankers were today licking their lips as a £1.7 billion takeover further fuelled hopes of a wave of UK mergers and acquisitions.
Insurance group Hastings saw its shares surge after agreeing a £1.66 billion takeover by two financial services companies, Finland’s Sampo and South Africa’s Rand Merchant Investment.
The deal followed hot on the heels of a takeover battle for the AA, which yesterday said a trio of private equity bidders were poised to take it private.
The cash offer for Hastings will hand its investors 250p a share as well as an interim dividend of 4.5p. Hastings shares jumped 18% to 253p.
Sampo and RMI are being advised by JP Morgan Cazenove and Hastings by Barclays, Fenchurch and Numis.
Sampo said the deal would help it expand beyond life insurance and outside Nordic markets.
The deals add to a groundswell of activity in London’s M&A market.
Last week AIM-listed miner Highland Gold agreed a takeover from Fortiana Holdings, controlled by Russian businessman Vladislav Sviblov. It valued Highland at £1 billion and would bring a windfall for backer Roman Abramovich, the owner of Chelsea FC.
The London Stock Exchange is also mulling selling the Milan exchange to ease its $27 billion Refinitiv deal through competition regulators.
The Square Mile’s army of bankers and brokers hope the chaos sparked by Covid-19 will bring a rush of deal-making and fees.
One, currently advising on two deals, said transactions on ice since the coronavirus outbreak were starting to take shape: “Private equity (PE) firms have got huge dry powder and are looking to invest. There’s a lot of UK companies undervalued and we’ll see PE and trade buyers sniffing around.
“That said, PE firms have been a bit surprised by how much the share prices of companies they were tracking before lockdown have bounced back.”
Dwayne Lysaght, co-head of M&A for EMEA at JP Morgan, said: “The number and volume of European deals valued at over a billion dollars in June and July were back at levels we saw pre-Covid. In the U.K., we’ve seen just a handful of larger deals in recent months, but the trend is upwards, and we expect it to continue that way.”
Investment banks have already enjoyed a strong year aided by more than 130 firms raising over £15 billion through fundraisers. However, the number of fundraisers has slowed over the last month as investor fatigue and summer holidays kick in.
There remains a number of large, complex fundraisers still expected including raisers from British Airways owner IAG, aero engines maker Rolls-Royce and shopping centre owner Hammerson.