Running Scared

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What's going on?

BT’s being pursued by an unwanted $20 billion acquisition, and the telecoms giant isn’t taking it lying down.

What does this mean?

BT’s had a rough few years, what with the ever-increasing costs involved in upgrading its broadband infrastructure. And once the pandemic was added to the mix, the company had little choice but to admit its earnings were at risk – as well as to cut its dividend for the first time ever. That’s now reportedly encouraged a few private equity firms to consider bids to take over BT, perhaps in hopes it’ll be able to modernize more successfully away from public eyes.

BT isn’t okay with these potential bids, and it’s asked investment bank Goldman Sachs to help fend them off using so-called “raid defense” tactics. Those might include a “poison pill” – which keeps the would-be buyer from taking full control of the company – or even a “white knight”, which involves finding a different buyer BT wouldn’t mind pairing up with.

Why should I care?

For markets: Ja, BT!

Some investors reckon private buyers would pay double BT’s current valuation of $13 billion, and some analysts think it’s worth even more – which might be why BT’s stock rose 5% on Monday (tweet this). It may even end up going higher if other potential buyers – like Germany’s Deutsche Telekom, which already owns 12% of BT – start sniffing round. Of course, they’ll have to decide if they want to cover BT’s expensive pension first, not to mention the UK’s telecoms regulator’s serious costs…

The bigger picture: Politicking timebomb.

It gets trickier: any buyer would likely be held to BT’s commitment to spend $16 billion on a UK-wide superfast broadband rollout, and may also be forced to promise not to cut jobs. And even then, the country’s government might not take kindly to potential foreign ownership: you just need to look at the Huawei ban to see telecoms at the forefront of its national security agenda.

Originally posted as part of the Finimize daily email.

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