Image source: Getty Images
An incredible 19 FTSE 250 stocks have been takeover targets this year, according to research from AJ Bell.
Of these, nine deals completed, including Centamin, Redrow and Virgin Money, while another six are in progress, notably Britvic and Direct Line. Across the FTSE 350, takeover activity tripled compared to 2023.
AJ Bell investment analyst Dan Coatsworth said many targets were previously “unloved or underappreciated”, and buyers couldn’t resist their low share prices. Love Island and Downton Abbey maker ITV (LSE: ITV) may be next.
The share price makes compulsive viewing
Takeover rumours have swirled around the TV broadcaster for years, but Coatsworth thinks recent speculation could be credible: “Private equity, a rival broadcaster or even a streaming platform could show interest.”
That’s certainly the way investors are betting. The ITV share price surged on 25 November, following reports that potential suitors are in early discussions with the board. We don’t know how serious this interest is, or whether the ITV board welcomes it.
ITV has laboured as Hollywood strikes disrupted TV and film productions, while advertising income has been bumpy.
Coatsworth describes ITV’s Studios content arm as a hidden gem, potentially worth more than the market value of the entire group: “Someone like Netflix could gobble up ITV for a fraction of its annual content spend and access its rich library of programmes.”
He says the ITVX streaming platform has beaten expectations and provides valuable insights into user viewing habits, which allows big brands to target customers. ITV could even be broken up and sold separately, Studios going to one bidder, it’s broadcasting arm and ITVX to another.
2025 could see a string of UK stock acquisitions
As a rule, I don’t buy on takeover talk, which so often comes to nothing. Yet many investors do, with the ITV share price jumping almost 18% in the last month. This flatters recent performance figures, as the shares are now up nearly 16% over one year. They’re down a brutal 53% over five years, which gives a clearer picture of its troubles.
As a result ITV look dirt cheap trading at 9.53 times trailing earnings, while the trailing yield is a bumper 6.8%.
Despite my sniffy resistance to buying shares on market rumours, there are arguments for doing so. Many UK stocks look undervalued right now, which means bidders are willing to pay a premium price and drive up valuations.
Recent bid activity has acted as a wake-up call for investors, persuading them to re-appraise the company in question. This is especially true if the board rejects bids, or even multiple bids. It makes investors wonder if they’re missing something. Coatsworth notes that shares in Anglo American, Rightmove and Currys have all revived after the boards fought off buyers rather than taking the money.
ITV shares have idled in recent days as takeover news dries up. I don’t need the short-term uncertainty, so I won’t buy them myself. Those who do continue to consider it may find the stock hard to resist. ITV certainly looks cheap and has a huge yield.