French buyers snapped up a slew of British assets on Wednesday, from a slice of the UK’s biggest telecoms group to a buyout of one of the country’s oldest technology companies, underlining how overseas acquirers are taking advantage of depressed valuations.
Entrepreneur Xavier Niel bought a 2.5 per cent stake in Vodafone; Schneider Electric agreed to buy Aveva for £9.5bn; and Suez moved to buy back its British waste-treatment business for around $2.3bn.
The UK is experiencing relatively high inflation, low investment confidence and a weaker currency, making it an attractive moment for European suitors to pounce on struggling British assets.
A top-25 shareholder in Aveva described the Schneider bid as “yet another example of a world-leading UK-listed company whose share price has been smashed to pieces being taken over”. Aveva’s shares have fallen 23 per cent in the past 12 months.
“As a beleaguered shareholder we can accept it — just — through gritted teeth. But it’s emblematic of what we’ve been having to deal with,” they said. “There is a massive ownership shift going on as the traditional owners of UK plc sell out to corporates, sovereign wealth funds and private equity, who can take advantage of the mispricing of UK equities.”
Senior business leaders have been warning for weeks that UK assets are now increasingly vulnerable to outside interest as the pound has tumbled to its lowest level since 1985, and companies have been hit by a pincer movement of rising costs and falling consumer spending.
Andrew Truscott, head of UK investment banking at Citigroup, said: “Each of these situations has its own peculiarities and you can’t extrapolate too much, but what you can see is that there is a global recognition that the businesses in the UK are cheap. There is not the liquidity coming into the UK [stock] market. It is all cash coming out,” he added.
Wednesday’s flurry of inbound French interest comes two months after France’s state-backed satellite group Eutelsat announced it was buying OneWeb, the space-based British internet company rescued from bankruptcy by Boris Johnson’s government. OneWeb had struggled to raise capital to come to market with its satellite constellation and become a viable standalone business.
In a parallel to Niel’s investment, French telecoms billionaire Patrick Drahi last year built an 18 per cent stake in former British telecoms monopoly BT, sparking speculation that the veteran dealmaker would ultimately try to wrest full control of the company.
“Since Brexit, valuations are very low so there are lots of companies that are listed in London that are very attractive financially,” said one French banker. “The UK companies are suffering from Brexit discount and the [falling] pound so lots of foreign buyers are scouting here, not just the French.”
Additional reporting by Anjli Raval