News of a takeover involving a listed company, whether true or false, can have a dramatic effect on the share price of both the acquiring company and the target.
So whether you own shares in the target or the predator, takeovers are interesting. The financial pages can help you in two ways:
The press love to speculate on possible takeovers. The Times has a 'Rumour of the Day' piece, and market journalists are at their happiest making predictions about impending bids. For instance:
"Shares of KS Biomedix surged 16p yesterday to 680p. There may be further upside . . . Kim Tan, the founder, is believed to be looking for an exit route and it looks like a bid of up to £10 a share may not be too far off."
The Times, 18.7.2000
Read these pieces, by all means. They're fun. Maybe even stick some spare money in 'target' companies and see what happens. But don't base your investing strategy on them.
The Financial Times lists all current takeover bids and mergers in its Saturday edition. It tells you the name of the target company, the value of the bid per share, the current market price, the pre-bid price of the target, the total value of the bid, and the name of the bidding company. For example, the edition of 9th September listed:
| Target | Bid | Mkt | Pre-bid | Total value | Bidder |
|---|---|---|---|---|---|
| SmithKline Beecham | 880 | 876.5 | 847 | 49.41bn | Glaxo Wellcome |
Newspapers can offer useful guidance on whether shareholders in a target company should accept or reject a bid. Management of both target and bidding company will send you documents putting their case, and both will be persuasive.
In this situation, press commentary has enormous influence and can be quite helpful. You should certainly follow the progress of the bid in the press and read what journalists have to say, even if ultimately you do not take their advice.
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