- Bodycote, Gamma Communications and Capricorn are the latest companies to agree deals that will remove them from the London market.
- The value of takeover deals taking companies off the LSE has reached almost $110bn this year, according to Bloomberg data.
- Investors may welcome takeover premiums, but analysts warn that the exodus could leave London with a weaker stock market.
London’s stock market is losing another three companies — and this time the numbers are getting harder to ignore.
Bodycote, Gamma Communications and Capricorn have all agreed takeover deals that will take them off the London market, pushing the total value of deals removing UK-listed companies from the exchange to almost $110bn this year, according to Bloomberg data.
The latest deals range from industrial manufacturing to telecoms and energy, but they share one striking feature: buyers are willing to pay billions to take companies out of the UK public markets.
For the London Stock Exchange, that is becoming an increasingly uncomfortable trend.
Bodycote, the FTSE 250 industrial services group listed in London since 1972, has agreed to a £1.84bn takeover by US private equity firm Veritas. The Macclesfield-based company provides services including heat treatment, metal joining and protective coatings for manufacturers.
The deal followed a bidding contest involving European private equity group CVC, which has indicated it is still considering whether to make a counteroffer.
Veritas argued that Bodycote would have greater flexibility and a longer-term investment approach away from public markets.
Why are buyers taking British companies private?
A similar argument is emerging across several of the latest deals.
Gamma Communications has recommended a £1.1bn offer from UK private equity firm Epiris after previously confirming it was in possible takeover discussions with European buyout group Waterland.
Epiris said private ownership would give Gamma greater flexibility to invest and focus on long-term growth.
Meanwhile, Scottish energy company Capricorn has agreed to a $396m takeover by Norwegian rival DNO. The deal will end Capricorn’s 38-year run on the FTSE All-Share index.
Capricorn had initially recommended an offer from Genel Energy but switched its recommendation after receiving a higher proposal from DNO.
The pattern is difficult to miss. Companies that have spent years building businesses on the London market are increasingly becoming acquisition targets for private equity groups and overseas rivals.
And the list of recent departures includes some much bigger names.
EasyJet agreed a £5.7bn takeover by US private equity firm Apollo, while warehouse landlord Segro agreed a £14bn takeover by US rival Prologis.
ITV’s broadcasting and streaming business is also being sold to Comcast, the owner of Sky, for £1.6bn.
Earlier in the year, asset manager Schroders agreed a £9.9bn takeover by a US investor, while specialist insurer Beazley agreed an £8bn acquisition by Zurich.
Intertek was another major departure, agreeing a £10bn takeover by a consortium led by Swedish private equity firm EQT.
The bigger problem for London
For shareholders in these companies, takeovers can look like good news. Buyers generally have to offer a premium to persuade investors to sell, giving shareholders an immediate payoff.
The concern is what happens to the market after the deal is completed.
Russ Mould, investment director at AJ Bell, warned that overseas buyers were continuing to “feast” on the UK market, arguing that the longer-term effect could be a further reduction in the breadth and quality of London’s stock market.
That creates a difficult cycle for the LSE.
If established companies continue to disappear through takeovers while fewer new businesses choose London for their listings, the market risks becoming smaller and less attractive to investors.
The latest deals therefore matter for more than the shareholders of Bodycote, Gamma Communications and Capricorn.
They add to a much bigger question facing the City: if overseas buyers keep finding British companies attractive enough to buy, why is London struggling to make those same businesses want to stay listed?
