FTSE boosted by Arm takeover as analysts look for further deals

Discussion in 'Market News' started by Lily, Jul 18, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    UK firms look good value after fall in sterling, according to the City

    Despite continuing global concerns - the fallout from Brexit, the attempted coup in Turkey - the proposed £24bn takeover of technology group Arm by Japan’s Softbank has sent leading shares higher.

    The FTSE 100 is currently up 24.10 points at 6693.34, with Arm accounting for all that and more (nearly 28 points).

    Despite the recent economic and political uncertainty, we note that an all-cash deal has been agreed. We continue to believe that UK technology companies could be acquisition targets for large global companies looking to add intellectual property or customers (the deal rationale for Softbank in our view) and expect to see further M&A activity in the sector.

    We could see near-term investor interest in other semiconductor names (eg IQE and Imagination Technologies); global leaders (eg GBGroup, NCC, Accesso); Internet of Things/virtual/augmented reality plays (eg Telit, Bango); or larger UK tech names with strong free cash flow and dividend (eg Micro Focus).

    Firstly, we can see in this deal the effect of Brexit and the collapse in the pound as British companies become ripe takeover targets. The pound is down around 10% since the referendum and this makes British firms a lot more attractive.

    Poundland was recently snapped up by Steinhoff and if this Arm deal is anything to go by, we can expect a torrent of deals to flow. Fears that Brexit would kill off deals in the UK seems to have been overblown – Britain is very much open for business and the weak pound is key. A lot more British firms could become foreign-owned quite soon.

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