Everyone loves a good buyout. These are the companies from across the value chain that I think could be targets in 2024.
When Mars bought Hotel Chocolat, I imagine that there was a sudden rush to invest in overpriced mid-tier chocolatiers. Then logistics firm Wincanton found itself a French partner and the epiphany began — London-listed companies are cheap as chips.
Of course, this is hardly news. The Superdry announcement today has started to send the whir of buyout rumours back around London — and I have a few companies in mind that could benefit from either a major, a major shareholder, or the hundreds of millions of private equity cash still waiting to make a move.
Let’s dive in.
Top takeover targets to watch
These are in no particular order and based purely on my subjective opinion (backed up by significant research).
Vodafone — This one’s easy; forget the Italian merger question or the Three join-up, Vodafone has a market cap of $18.6 billion and on a basic sum-of-parts valuation is wildly cheap.
ITV — Liberty Global already owns 9.8% of ITV and like Vodafone it’s a bargain. After the market cap collapse in March 2022, I think the market valuation vs fundamentals is crazy: 18 million people watch ITV every day, and 37 million each week. With a £2.4 billion market cap, compare this to Netflix at $246 billion, and 260 million subscribers. Yes, there are huge differences in terms of ad-support vs subscription, but the potential is there.
Sainsbury’s — I think Tesco might also be in the firing line, but SBRY is simply more of a manageable bite. After CD&R took Morrisons private after a protracted bidding war (bet they regret it now), Sainsbury’s also looks far too cheap based on market cap and revenue/profits, especially when compared with US operators.
Disney — Apple is the most obvious buyer of Disney, though Netflix may also make sense. The streamer recently signed a novel deal with Disney and the synergies work, though Apple and Disney have long been a rumoured partnership (think since the 2000s). The truth is that Disney is currently cheap, and better operators could drive significant value. I know it’s not in the UK, but I can include it if I want.
hVIVO — CEO Yamin Khan noted in results that ‘the infectious disease market has witnessed increased interest from both commercial and non-profit entities, as well as a notable uptick in M&A activity.’ Not subtle, and the company works with multiple pharma titans in a highly specialised area with a strong economic moat. Clients even paid for its swanky new lab, and I would be surprised to see it stay on the market in 2025.
Baron Oil — farm-up signed, funding possibly imminent, and when the majors finally get in gear and make some decisions, Chuditch will be bought at a significant premium. I am absolutely convinced of this and will continue to add at low prices through 2024. Selling/trading? Don’t complain when the rocket launches.
Premier African Minerals — questions remain over the sorters, funding, and the lithium price. The risks are high, the rewards match. But the long-term strategy has always been to sell the current Zulu asset and associated plant for a wodge of cash from Canmax, and then go explore the EPO for some rinse and repeat action.
Atlantic Lithium — Ewoyaa has Ghanian government funding, Piedmont backing and agreements, funding, and an excellent lithium asset. Assore is a major shareholder — and just took some shares off Piedmont’s hands to increase its stake. Assore has previously made bids to take the business private, but they were rejected as too low. Given the structural weakness of the spodumene price, I am certain increasing its stake is the first step to an improved offer.
Greatland Gold — perhaps not all of GGP, but its 30% of Havieron. It’s about 50:50 whether the newly empowered Newmont will dispose of its 70% and Telfer, or make an offer to Greatland for its 30% of the massive gold deposit. But one way or another, some certainty will be found in 2024.
Avacta — chemotherapy without side effects. There is no chance this company remains independent for long, even if trials remain in early stages, the pre CISION platform alone makes this an inevitable target for big pharma. No idea what price to put on it, but much more than the current market cap. Novartis is next door.
Cizzle — Bio Techne will want this lung test at some point, Cizzle is pennies to the major and it’s only a matter of time. The test is unique and fills a pressing need.
Polarean Imaging — the science behind the lung imaging tech is sound and the company is massively depressed. While a riskier investment, the upside could be massive if you time it right.
Sovereign Metals — Rio Tinto owns 15% of the company which has the largest rutile and second largest graphite deposit in the world. Rio will buy Kasiya from SVML within the next couple of years (in some form), and recent RNSs could meant that the deposit is even more globally significant than now.
PXEN — cash generative, European, grid connection. It’s just cheap and won’t last at this valuation for long. Someone will take notice.
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The bottom line
Whether blue chip billions or small cap pennies, there is a host of undervalued companies ready to be scooped up at inferior valuations. On a macroeconomic scale, interest rates will start to fall in H2 2024, and these companies will rise in market capitalisation; there is a timer on these valuations.
This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.
Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.