As a quick reminder, Ted Baker is a global lifestyle brand based in the UK. Its collections include menswear, womenswear, accessories, fragrance, footwear, eye wear, and watches. It currently has stores in the UK, US, and Asia.

Ted Baker share price rallies amid takeover talk

Ted Baker has been the subject of takeover interest in recent weeks. I believe this has caused the shares to rally. Here’s a quick timeline of events.

• 18 March 2022 – US-based private equity firm Sycamore expresses interest in buying Ted Baker, causing the Ted Baker share price to rally by 21%. Under UK takeover rules, Sycamore must submit a bid or walk away by 5pm on 15 April.

• 25 March 2022 – Sycamore submits a formal bid to buy Ted Baker with an offer of 130p per share, totalling £250m.

• A few days later, Sycamore sees a second bid of £253.8m rejected.

• 4 April 2022 – Sycamore reveals third approach for Ted Baker although specific figures are not released. Ted Baker board confirms it is willing to sell the business if terms and financials are met. The Ted Baker share price closed up 14% after news of the third offer broke.

• 13 April 2022 – Ted Baker confirms Sycamore will take part in the formal sale process it initiated a week prior after Sycamore’s initial bids.

Current state of play

The Ted Baker share price has been on a downward trajectory for some years. The pandemic did not help. As I write, the shares are trading for 149p. Year to date, the shares are up 44% from 103p to current levels. The shares have rallied 52% from 98p to current levels.

Let’s take a look at Ted Baker’s performance and recent trading. The past couple of years have been tough. The pandemic took its toll and 2021 results were poor and highlighted Ted Baker’s reliance on its store network. Remember this is a store network ravaged by closures due to the pandemic.

It did release a Q4 and pre-close update in March, before the takeover speculation began. Sales growth of 35% compared to Q4 2021, increasing from 18% reported at Q3 is a significant achievement. There are signs of life still.

I believe Ted Baker faces intense competition from the rise in fast fashion. This could dent future performance and investment viability. Furthermore, macroeconomic factors such as rising costs and supply chain issues are sure to impact performance too. I think this will hinder any recovery.

My verdict

My investing mantra has always been long-term buy and hold. For that reason I’m not going to buy shares in an attempt to turn a quick profit in case Ted Baker is sold. I don’t think the shares will go much higher.

I’m not sure what will happen or if the business will be sold but I will keep a keen eye on developments. If the business is not sold, or Sycamore decides not to press ahead, I expect the Ted Baker share price to fall once more. I still wouldn’t buy shares if the business wasn’t sold as I feel Ted Baker’s recovery could be long and arduous.

The post What’s happening with the Ted Baker share price? appeared first on The Twelfth Magpie.

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Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, BT has seen a steady increase in its share price since the turn of the year, up 11% in that period. What’s more, in the past 12 months it has risen 45%.

So, while the stock has struggled in the past, I’m optimistic about what the rest of the year and beyond could have in store for BT. Here’s why.

BT debt concerns

Although I’m excited about where the BT share price could go in 2022 and beyond, let’s start by getting my concerns out of the way. My main issue is surrounding the firm’s debt, which is currently sat at £18.2bn – a rather large figure. And this is worsened by rising inflation and interest rates. As rates have begun to creep up post-pandemic, this will make the debt BT has even more difficult to pay off. This is a potential stumbling block for progress. 

BT share price optimism

However, there are multiple reasons why I remain bullish on BT.

Firstly, last month it was announced that the firm was in the final stages of selling its Premier League rights to streaming service DAZN. The deal is rumoured to be in the region of $800m. And while there have been reports of the deal stalling, this sum would provide BT with a cash injection. As such, it could leverage the firm’s ability to pay off some of the substantial debt mentioned above.

What also provides me with optimism, and as highlighted by my fellow Fool Rupert Hargreaves, is that the company’s projections and analysts’ expectations anticipate BT to grow in 2023 as customers slowly return to the business. This will be the first time since 2016. While these expectations may not be met, if they were I would expect to see a rise in the BT share price as the market reassesses its potential.  

Further, speculation continues over a potential takeover by billionaire Patrick Drahi. After increasing his stake in the firm from 12.1% to 18% late last year, some believe he could be setting the foundations to mount a bid. While we will have to wait until summer to see if this comes to fruition due to UK takeover regulations, a potential takeover will most certainly boost the BT share price.

Why I’d buy

I’d never buy a stock just because of takeover talk. But while some of the above may be speculative, I think it highlights the potential the BT share price has to rise. The firm will benefit from any cash injection received from the sale of its Premier League rights. And this income could attribute to reducing its debt. Potential growth for the first time in seven years also excites me. With BT currently trading for 192p, I would be willing to add the stock to my portfolio today.

The post Why I’m excited about where the BT share price could go! appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Morrisons (LSE: MRW) share price barely moved this morning, despite the company revealing a big fall in profit in its interim numbers. 

Falling profit

Total revenue (including fuel) for the six months to 1 August rose 3.7% to just over £9bn. But like-for-like sales (excluding fuel and VAT) were down 0.3%. This was in sharp contrast to the 8.7% increase reported in the same period last year.

Online like-for-like sales jumped 48% and are now up over 237.1% compared to two years ago, helped by the company’s relationship with Amazon. A total of 328 stores are also now working with Deliveroo to provide grocery home delivery. 

However, profit before tax and exceptionals tumbled 37.1% to £105m. This was due to £41m of pandemic-related costs and £80m in lost profit in sales from cafes, fuel and food-to-go. On a statutory basis, pre-tax profit fell 43.4% to £82m.

Looking ahead 

Morrisons made no change to its guidance. The UK supermarket expects profit before tax and exceptional items to be above the £431m recorded for 2020/21. However, this is dependent on a reduction in Covid-19 costs, lower lost profit and the company’s ability to manage cost increases relating to its supply chain.

Further ahead, the company expects “material benefits” in 2022/23 as a result of Covid-19 costs not being repeated and the “full recovery of lost profit”.

No dividend

Morrisons also confirmed it would be recommending Clayton, Dubilier & Rice’s offer of 285p per share to shareholders. The latter will be required to approve this offer at the company’s General Meeting in mid-October. This is likely to be the reason for the static share price today.

As a result of the expected takeover, the £7bn cap confirmed that it would not be paying an interim dividend to shareholders. 

The post Morrisons’ share price stays flat despite 37% fall in profit appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Morrisons and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Bidding war

The standout driver behind the Morrisons share price is the bidding war for its acquisition. This is between US private equity firms CD&R and Fortress and has been heating up over the past few months. CD&R had initially offered a £5.5bn bid which was declined by the Morrisons board after being considered undervalued. Fortress then entered the scene with an increased £6.7bn bid, a 272p share offer. This was recommended by the Morrisons board to investors. However, CD&R then came back with a £7bn offer which was accepted by Morrisons last week.

This £7bn offer marks a per-share value of 285p. When the offer news broke, the share price jumped from 279p to above 290p. Fortress has been left “considering its options”, but British takeover rules still allow Fortress to submit a higher offer. If this was the case and the bidding war continues, I think we could see the short-term Morrisons share price push higher. What’s more, there is talk among analysts that Morrisons partner Amazon could enter the bidding war. If this were to happen, prices could be pushed up even further.

Valuation problems

The bidding war seems to be good news for the short-term Morrisons share price. However, it has also led to a pretty steep valuation of the company. The current Morrisons price-earnings (P/E) ratio is 72.5 times. Comparing this with a similarly priced competitor like Tesco who has a P/E ratio of just 4 times begs the question of whether the Morrisons share price is vastly overvalued.

There are also further complications that Brexit has brought to the food retail sector. Worries of potential shortages well into 2022 are likely to halt growth in the industry. Industry leaders have urged the government to relax immigration rules to fill growing gaps in the workforce. Moving forward, this could be a major concern for the Morrisons share price.

Morrisons share price: the verdict

The short-term price moves will be made in reaction to new bidding news. This could certainly push the Morrisons share price higher. However, this is too hypothetical for me to add Morrisons to my portfolio just yet. I prefer to focus on the tangibles such as valuation and Brexit. For me these factors currently outweigh the opportunity the bidding price war brings. Therefore, although I believe the Morrisons share price could theoretically climb higher, I won’t be adding it to my portfolio today.

The post Can the Morrisons share price keep climbing higher? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned above. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Morrisons and Tesco and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What’s the deal?

Under the terms of the deal, owners of the stock will receive a round 800p for every share that they own. This would be a 70.5% uplift on the Meggitt share price last Friday. As Mondays go, I can think of worse ways to start a week as an investor!

It’s not hard to see why Parker would be interested in acquiring the FTSE 250 member either. Both already supply defence equipment to the UK and US governments, as well as those in the EU. Snapping up Meggitt would also allow the $47bn giant the opportunity to double its Aerospace Systems segment. 

The latter could be great timing on Parker’s part. Describing the deal as “strategically and culturally compelling”, Meggitt’s potential suitor believes the deal will allow it to take advantage of strong growth opportunities going forward, especially as the world gets back to normal after Covid-19 and commercial aerospace recovers.

Based on its calculations, Parker believes its earnings will increase in the first full year after the deal is done. It’s certainly no stranger to acquiring and successfully integrating UK companies.

This is not to say that Meggitt will be moving across the pond. To allay any fears, Parker has already said that it will keep the components supplier headquartered in the UK and ensure that the majority of Meggitt’s board is made up of UK nationals. R&D spending will also be maintained (and possibly increased) in the years ahead.

Meggitt share price: what now?

Unsurprisingly, Meggitt’s directors have unanimously recommended that shareholders vote to accept the takeover. This is where things get even more interesting.

The Meggitt share price was trading around 730p a pop this morning. That’s up a whopping 55% on last Friday’s closing price. However, it’s still almost 10% below the offer price mentioned in today’s statement.

The question is whether today’s news will bring out another bidder. As Morrisons has shown, it only takes one buyer to show their hand before others arrive on the scene. Then again, a premium of over 70% is already very generous and takes the share price back above pre-Covid levels. Another potential suitor would really need to dig deep.

There is, of course, always a chance the deal might fall through. Holders may reject the offer, thinking they can get more for their company. Should this be the case, I’d expect the share price to become volatile if no one else steps forward. It’s interesting to note that gaming firm Sumo Group‘s valuation has begun to drift since it received an offer from China’s Tencent in mid-July. Then again, this might have something to do with the internet giant hitting the headlines back home!

UK plc on sale!

Regardless of what happens next, today’s announcement is more evidence that the (relatively cheap) UK market is continuing to attract overseas bidders. As such, I don’t think this will be the last big takeover we’ll be hearing about in 2021. Indeed, I suspect FTSE 100 firm Burberry could be one of the next to receive an offer or two unless it takes steps to reassure investors.

The post Here’s why the Meggitt share price is rocketing today! appeared first on The Twelfth Magpie.

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Paul Summers holds shares in Burberry. The Motley Fool UK has recommended Meggitt, Burberry and Morrisons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Holders of UK gaming company Sumo Group (LSE: SUMO) will be enjoying a huge jump in the company’s share price this morning, thanks to a takeover bid. I don’t think this growth stock will be the last to fall at the hands of an overseas suitor either.

Another UK growth stock is snapped up

Today, it was revealed that an agreement had been reached for an all-cash sale of Sumo to Chinese internet giant Tencent. Under the terms of the deal, each existing owner will receive 513p for every share that they own. All told, this values Sumo at £919m.

I think this represents a great return for holders and gives a premium of roughly 43.3% on Sumo’s share price of 358p at last Friday’s close. Before today’s announcement, those who had snapped up a stake in this company just a year ago would have near-doubled their money. Today, that gain became just over 180%! 

Sumo isn’t going cheap either. Before this morning, shares were already trading at 40 times forecast earnings. At today’s bid price, the valuation is now an eye-watering 58 times earnings. That’s a meaty price for Tencent to pay. So, as much as I hate to see a promising UK growth stock fall into the hands of the Chinese giant, I wouldn’t blame holders for giving the deal two thumbs up. 

Then again, we could still see a bidding war erupt. This exact scenario played out with fellow UK gaming stock Codemasters not long ago.

Who will receive a takeover bid next?

While Sumo has been a great UK growth stock, the name of the company was unlikely to be on the radars of many in the market. However, today’s news shouts out two things to me.

First, the gaming sector continues to be white-hot. In fact, I think this space could be one of the investment themes of the next decade when the growing popularity of eSports is taken into account. For this reason, I wouldn’t blame holders of Team 17 and Frontier Developments for licking their lips over potential deals.

Second, news of today’s bid is yet another indication that the UK market remains attractive to overseas/private equity firms. Morrisons is one big name that’s set to be sold. I think FTSE 100 broadcaster ITV, luxury goods firm Burberry and price comparison site Moneysupermarket.com might be next. Then again, I would say that — I own all three! 

The only problem with all this is that no one knows for sure who will receive a bid (other than those making it!). For this reason, I’d never buy a stock solely on the possibility that it might be taken over. I need to be confident that each of the companies I own is robust enough to survive on its own. To do otherwise would be risky. This is especially true if the company was already going through a period of wobbly trading. Takeover offers can be great when they happen. However, they must never be presumed.

What I’d buy now

So, congratulations to holders of Sumo. While there could be another chapter of this tale to go, I’d already be turning my attention to finding other UK growth stocks to fill the eventual void in my portfolio.

Having tumbled in price recently, one in particular really catches my eye.

The post Here’s why the Sumo share price jumped 43% today! appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in Burberry, ITV and Moneysupermarket.com. The Motley Fool UK has recommended Burberry, Frontier Developments, ITV, Moneysupermarket.com, and Morrisons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Burberry (LSE: BRBY) share price was on the back foot again this morning, despite soon-to-depart CEO Marco Gobbetti stating that the FTSE 100 company had made an “excellent start to the new fiscal year“. Should shareholders like me be running scared or loading up on the luxury brand’s stock? I think it’s the latter.

“Strong recovery”

Today, Burberry revealed that it had seen a “strong recovery” in the first quarter of its financial year. Positively, comparable stores sales were now “in line” with those before the pandemic struck. These were up 90% on those achieved over the same period last year and 1% on 2019. Retail revenue hit £479m in the 13 weeks to 26 June. 

The biggest jump occurred in the Americas where sales jumped 341% on last year. In Europe, the Middle East, India and Asia, there was 146% growth, although fewer tourists visiting its stores thanks to travel restrictions continues to be a problem. Having recovered quickly from the pandemic, sales in the Asia Pacific region were 27% higher.

In line with many other businesses, Burberry also saw “excellent growth” online. Here, full-price sales were more than double those from 2019. In addition to this, the company stated that it had received an “excellent response” to its new handbag campaign featuring influencer Kendall Jenner. Full-price sales to new customers over the quarter rose by “mid-30%s“.

Looking ahead, Burberry chose to keep its FY22 guidance unchanged. The only exception is at its wholesale arm which is now predicted to rise 60% year-on-year due in part to a healthier order book. High single-digit revenue growth over the medium term “remains firmly on track“, it said. 

So, is now the time to load up?

As a holder, I’m naturally biased. However, I do feel that the recent weakness in the Burberry share price is an opportunity for me to snap up more shares in a company that I suspect will be worth a lot more in a few years. This is an iconic brand, hugely popular with increasingly affluent (and environmentally-conscious) consumers, particularly in countries like China and Korea.

Naturally, there’s are a few hurdles ahead. The most obvious of these is finding a new leader. The news of the forthcoming departure of Gobbetti has hit sentiment and exposed a lack of succession planning in Burberry’s ranks. It’s also thrown into question the company’s ability to complete its turnaround without his influence.

Other things that may be troubling investors include the fact that 35% of Burberry’s stores are still operating on reduced hours. The ongoing travel restrictions aren’t helping either. 

I’d buy the dip

Ultimately, I’m confident a suitable replacement will be found. The concern that Burberry’s strategy will collapse due to one man’s departure is taking things too far. All management moves on eventually. As usual, the market simply hates uncertainty.

In my opinion, the time to buy a quality company’s stock is when it’s on sale due to a temporary setback. While it could take a while for the Burberry ship to steady, I believe it will. As such, I would have no issue adding to my holding today.

For me, the main worry is not Covid-19, nor the loss of a CEO. It’s that Burberry will be taken out by a suitor at a price that doesn’t fully reflect what I believe to be its true value.

The post The Burberry share price is falling. I’d buy this FTSE 100 stock now! appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Burberry. The Motley Fool UK has recommended Burberry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The surging Morrisons share price

The explosive growth started in mid-June following a takeover bid from Clayton, Dubilier & Rice (CD&R). The private equity firm tried to acquire the whole business for £5.5bn. Seeing the share price jump to match the offer is not that surprising. But after some deliberation, the management team firmly rejected the bid. They said the “Conditional Proposal significantly undervalued Morrisons and its future prospects”.

In my experience, a rejection of the first takeover bid is often followed by a higher bid by either the same or another firm. Personally, I had my doubts about another offer materialising given the size of the deal. However, it seems I was wrong on that one. Oppidum Bidco (a newly formed company indirectly owned by Fortress Investment Group) has just made a bid for £6.3bn that Morrisons has recommended.

This second bid again sent the Morrisons share price flying even higher. And it’s now trading around 265p per share. However, what’s odd is that the acquisition price (which has yet to be approved by shareholders) stands at 254p. So why is the share price higher?

What’s next, and what are the risks moving forward?

It seems that investors are convinced that yet again, another higher bid will be made for Morrisons. This has yet to be seen. But private equity firm Apollo Global Management has announced it’s in “the preliminary stages of evaluating a possible offer for Morrisons”. Meanwhile, there are rumours that Amazon may be looking to expand its existing grocery partnership with Morrisons into a full-blown acquisition.

Needless to say, if another larger offer were to be made, then the Morrisons share price could continue to climb. But to me, this is starting to look like speculation rather than investing. There’s no guarantee that another offer will be made. Not to mention that even if shareholders approve Oppidum Bidco’s offer, the deal may still not go through. 

The bottom line

Overall, my opinion on the business remains largely unchanged. The management team’s ability to adapt to rising competition and new shifts in consumer behaviour with home delivery has allowed the company to retain its market share and reward shareholders with a sizable dividend.

Therefore, if an acquisition doesn’t happen, the subsequently falling Morrisons share price could be an attractive buying opportunity for my portfolio. However, at its current price, I don’t see much upside potential left. I won’t be buying any shares today.

The post What’s going on with the Morrisons share price? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Morrisons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.