Another international deal to take a UK company off London’s stock market was struck today, highlighting worries across the City that inherently low valuations are turning the square mile into a bargain basement.
Lok’nStore became the latest target of a high-premium overseas buyout, in a bid from Belgian rival Suregard valuing the temporary storage firm’s stock at £378 million.
The 1110p per share offer came in 16% above yesterday’s closing price, even after a strong recent rally for the stock. The offer was almost 37% higher than the wider, three-month “volume weighted” average price used by bankers to price deals.
It was high enough to secure backing from Lok’nStore’s board, while also playing into fears over the deepening trend for firms to leave London.
Tony Cross, at the City’s stock market database Investegate, said: “Lok’nStore is the latest in a line of London-listed companies to announce it can get better value for its shareholder by way of an acquisition,” adding:
“The fact such a success story is set to fall into the hands of foreign ownership does little to allay fears that the Great Fire Sale of London is anywhere near burning itself out.”
Other recent offers have been turned down, with some big-name firms refusing to engage with offers they have branded as opportunistic or even absurd. They have included retail chain Currys and insurer Direct Line.
And the worries over valuations have also reached the highest echelons of the market.
London was snubbed last year by one of its biggest success stories, chip designer Arm Holdings, when it chose New York as its home on returning to life as a listed company. It has a market value of $129 billion, or £103 billion, enough to make it the fourth most valuable FTSE 100 member if it had picked London.
Wall Street is able to command better prices than the City due to a deeper pool of capital and wider base of investors. For companies looking for the best home for their shares, that gives the other side of the Atlantic more pulling power.
In what could lead to the most devastating blow for London, the chief executive of Shell, Wael Sawan, is widely seen to have put London on two years’ notice that one of its biggest and longest-standing firms could make the move.
The UK’s top oil major is a founder member of the FTSE 100, has recently grappled with AstraZeneca over status as the UK’s most valuable company. It is currently holding the crown, with a market capitalisation of £184 billion.
Sawan told the Bloomberg financial news agency that Shell was considering “all options” over what it sees as a valuation gap, with 2025 set as a time for potential action.
Valuations are a hot topic across the market. This week, the £72 million pharmaceutical firm E-Therapeutics announced plans to de-list its shares from the AIM market, which is designed for smaller newer and fast-growing firms.
Its chief executive, Ali Mortazavi, said: “The UK markets are not just illiquid, they’re completely broken and closed.”
Posting on social media site X, he continued: “ The situation is worse for small [high] growth companies.”
He pointed to “a blanket refusal to invest in an AIM company” and a “consistent message” from potential investors in London that “a private company would be far more attractive”.
7/ … there are obviously a whole host of reasons as to why we have reached this point. The markets are mirroring some of the general underlying problems that the UK is currently suffering from. Regardless, it is a time for urgent reform and action. #LSE #AIM $etx
— Ali Mortazavi (@AAMortazavi) April 10, 2024
Lok’nStore’s shares rose above the offer price – up 172p to 1130p – in a sign traders were betting another, higher priced offer could follow.
Andrew Jacobs, Chair of Lok'nStore, said:
"Lok'nStore's board believes the offer represents significant value for Lok'nStore's shareholders.
“ We believe that integrating Lok'nStore's assets and operations into Shurgard is highly complementary considering Lok'nStore's asset locations and positioning in its markets.”
Marc Oursin, Chief Executive Officer of Shurgard, said: “ I am excited to disclose this new acquisition in the UK, which doubles our presence in the country, and accelerates our growth and expansion strategy.
“The acquisition brings with it a strong pipeline and development team, which can be leveraged to accelerate new opportunities in London, the South East and Manchester.”
