According to Sky News, the company’s board has instructed its City advisers Goldman Sachs to update its bid defence strategy against such buyout from industry competitors and investment firms.
The news comes after the Group suspended its 2019/20 final dividend and all dividends for 2020/21, back in May due to due to the impact of Covid-19.
Saying “… the board concluded that the prudent and proper decision was to suspend the 2019/20 final dividend and all dividends for 2020/21, and re-base future dividends to a more sustainable level.”
"We expect to resume dividend payments in 2021/22, rebased to 7.7p per share,” said Jan du Plessis, chairman, BT Group
At the same time, the company has also experienced its lowest share price drop for ten years.
With a current market valuation of just £10.1 billion, many analysts believe that has fallen so low that equity is worth half of that of its Openreach infrastructure division is worth alone.
Its shares have also been impacted by its suffering Global Services division and the costs associated with the roll out of full-fibre broadband across the UK.
It is believed that due to BT’s role in the development of the UK’s 5G networks, as well as its recent commitment to funding a £12 billion roll out of superfast fibre broadband to 20 million location by 2030, any takeover would have to be government approved and in line with the recent Huawei ban as well as security and foreign investment policies.
In addition, any deal would also have to be agreed by Deutsche Telekom, BT's biggest shareholder.
Since news of a potential takeover broke, BT has recorded a 7% surge in share price.
According to The Standard, the Group share price lifted jumped 7p to 109p as of Monday 24 August 2020.
“This morning we note the strong gains in BT’s share price, up in excess of 5% at the open which follows on from a period of sustained weakness and the shares more than halving over the last two years,” said Helal Miah, investment research analyst at The Share Centre.”
Miah added that no bids have been confirmed, companies “may be attracted by the fact that individual businesses such as Openreach are valued far higher than the sum of the parts of £10bn with potential bidders coming from the private equity industry”.
Adding that Deutsche Telekom is a likely candidate given its existing 12% stake in BT following BT’s acquisition of EE several years ago.
“This speculation in some ways justifies current investor’s belief that the company is undervalued but its current organisational structure suggests the share price will not appreciate to fair valuation anytime soon,” continued Miah.
“The view among some is that if BT is to become a private company it may be easier to restructure and unlock value than as listed business. This does not help long suffering retail investors much, but this speculation may help in establishing a floor to BT’s share price and may give more impetus for management, and even the government/regulators in helping BT achieve that restructuring that is much needed.”
