UK stocks have been takeover targets for opportunistic investors for the last few years. And that doesn’t look like it’s showing any signs of stopping.
June could well be a busy month in the stock market on this front. But investors looking for shares to consider buying need to tread carefully here.
Takeovers
Shares in Tate & Lyle jumped 36.62% in May on news of a takeover bid from Ingredion. Under UK takeover rules, the US firm has until June 11 to make a firm bid.
Gamma Communications also announced acquisition talks with a number of potential buyers. And the stock also climbed significantly on the news.
The third name that caught my eye, however, is a different one. Real estate investment trusts (REITs) have been targets recently and Alternative Income REIT (LSE:AIRE) is now one.
Unlike the others, however, Alternative Income REIT’s share price fell just over 7% in May. That’s unusual when there are rumours of a takeover.
A couple of months ago, there was also interest from AEW UK REIT. So should investors consider buying the stock before others get there?
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What’s the situation?
High dividend yields have been making UK REITs attractive acquisition targets for some time. And Alternative Income REIT is a relatively small operation.
The current interest is from Glenstone REIT, which owns 24% of the company. And in some ways, it’s more of an activist campaign than a takeover.
Alternative Income REIT’s shares are trading 19% below the firm’s reported net asset value. So Glenstone wants to realise some of this discount by selling off properties.
One way to do this is through Glenstone buying the remaining shares. Another is via Alternative Income REIT selling its assets and returning the cash to shareholders.
Glenstone hasn’t yet named a price and the deadline for this is 12 June. So should investors look to get in ahead of a potential opportunity?
Be careful
Companies getting taken over can involve big returns for investors. But this is a risky business and one to approach with extreme caution.
Glenstone really wants Alternative Income REIT to move to a smaller exchange and wind down from there. But that could be an issue for shareholders.
Most retail brokers don’t offer access to these exchanges. That would mean investors lose the ability to sell their shares in an open market.
