Takeovers of UK companies by foreign firms have surged to the highest point since the end of 2018, with more major deals under negotiation, including the £7bn sale of Morrisons to a US private equity house.
Mergers and acquisitions conducted by foreign companies of UK firms were worth £27.7bn between April and June, up from £8.3bn in the first quarter, according to the latest figures from the Office for National Statistics (ONS). That was the highest level since the last three months of 2018, when US cable giant Comcast’s £30bn takeover of Sky pushed the quarter’s total to £33.3bn.
Deals completed in the second quarter include the £7.2bn takeover, agreed last November, of the 300-year-old UK insurer RSA by Canadian rival Intact Financial Corporation and the Scandinavian insurer Tryg. The agreement will result in the breakup of RSA, which owns the More Than brand.
Security outsourcing firm G4S was bought by US firm Allied Universal Security Services in a £3.8bn deal, which trumped a rival offer from Canadian suitor GardaWorld.
A spate of more recent deals that have been agreed but not yet completed, as well as others that are still in the bidding process, are not included in the ONS data, and will push up the total of inward mergers and acquisitions for this year.
These include the proposed £7bn sale of Morrisons, Britain’s fourth-biggest supermarket group, to a US private equity firm. Clayton, Dubilier & Rice outbid US rival Fortress, which owns Majestic Wine and is itself owned by the Japanese investment company SoftBank. The trustees of the Morrisons pension schemes have warned that the sale could “materially weaken” the financial position of the funds.
Another controversial deal is the Marlboro cigarette maker Philip Morris International’s £1.1bn offer for the UK asthma inhaler maker Vectura, which was unanimously recommended by its board despite stark warnings from public health experts and charities. Shareholders have until 15 September to decide whether to accept the offer.
A number of UK firms in sectors ranging from telecoms to children’s social care have caught the eye of foreign private equity firms, raising fears over jobs and pensions. In the first half of 2021, private equity investment jumped to the highest level since 2017, according to KPMG, which tracked 785 private equity deals in the UK with a combined value of almost £74bn.
The UK infrastructure group John Laing has accepted a £2bn offer from US firm KKR, while Luxembourg-based CVC has clinched a £767m takeover of the London-listed vodka maker Stock Spirits.
Two British defence contractors have also attracted overseas bids: jobs are under threat at the British engineering firm Meggitt after it agreed a £6.3bn takeover deal by US rival Parker Hannifin, which the UK government is closely monitoring. The business minister, Kwasi Kwarteng, has also told the competition regulator to examine the proposed £2.6bn sale of Ultra Electronics to Cobham’s US private equity owner Advent on national security grounds.
In addition, Kwarteng has ordered a national security review of a takeover by a Chinese academic of a small Welsh manufacturer of graphene. The business secretary instructed the Competition and Markets Authority to review the planned takeover of Perpetuus Group by Taurus International or any companies associated with Dr Zhongfu Zhou.
According to data from Refinitiv, buyout companies from around the world have been targeting UK firms, comprising about a tenth of their total spend over the first six months of the year.
