Telecoms Giant BT Avoiding Takeover

Telecoms Giant BT Avoiding Takeover

over 3 years ago2 mins

Mentioned in story

BT’s being pursued by an unwanted $20 billion acquisition, but the telecoms giant isn’t taking it lying down ⚔️

What does this mean?

BT’s had a rough few years, with the ever-increasing costs involved in upgrading its broadband infrastructure. And once the pandemic was added to the mix, the company had little choice but to admit its earnings were at risk – as well as to cut its dividend for the first time ever 🦠 That’s now reportedly encouraged a few private equity firms to consider bids to take over BT, perhaps in hopes it’ll be able to modernize more successfully away from public eyes.

BT’s dividends (p) | Source: Company accounts, company forecasts for 2021 and 2022
BT’s dividends (p) | Source: Company accounts, company forecasts for 2021 and 2022

BT isn’t okay with these potential bids, and it’s asked investment bank Goldman Sachs to help fend them off using so-called “raid defense” tactics. Those might include a “poison pill” – which keeps the would-be buyer from taking full control of the company – or even a “white knight”, which involves finding a different buyer BT wouldn’t mind pairing up with 🤔

Why should I care?

Some investors reckon private buyers would pay double BT’s current valuation of $13 billion, and some analysts think it’s worth even more – which might be why BT’s stock rose 5% on Monday. Its share price may even end up going higher if other potential buyers – like Germany’s Deutsche Telekom, which already owns 12% of BT – start sniffing round. Of course, they’ll have to decide if they want to cover BT’s expensive pension first, not to mention the UK’s telecoms regulator’s big costs…

Source: Google Finance
Source: Google Finance

It gets trickier: any buyer would likely be held to BT’s commitment to spend $16 billion on a UK-wide superfast broadband rollout, and may also be forced to promise not to cut jobs 🇬🇧 And even then, the country’s government might not take kindly to potential foreign ownership: you just need to look at the Huawei ban to see telecoms at the forefront of its national security agenda.

Daily Brief Image
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG