“Historically low valuations of UK companies”, including oil giant BP (LON: BP), could make them “potentially-attractive takeover targets”, asset manager M&G has claimed.
In a research note, Michael Stiasny, head of UK equities at the investment firm, among the nation’s largest fund managers, says “we would not be shocked to see a big name in the oil and gas or mining sectors subject to a bid”.
London-listed energy giant BP was specifically singled out, with the supermajor “trading at a significant discount to their UK peers”.
As of this month, BP, which names M&G amongst its shareholders, has a market value of around £88 billion, according to tracking website companiesmarketcap.
For comparison, that is almost half of fellow London-listed supermajor Shell’s market cap, £165bn, while US giant ExxonMobil is valued at £379bn, making it the world’s 12th most valuable company.
In terms of oil and gas, Saudi Aramco leads the way with a market cap of some £1.5 trillion, putting it second only to Apple.
Mr Stiasny said: “Historically low valuations of UK companies, alongside currency weakness, have also created potentially-attractive takeover targets. We may, therefore, see high-profile companies leave UK indices.
“While we do not base our investment decisions on such speculation, we would not be shocked to see a big name in the oil and gas or mining sectors subject to a bid, with companies like BP trading at a significant discount to their US peers, even after a strong year of performance.”
He added: “After a difficult 2022, many investors are eager for a return of the global investment themes that have worked so well for them over the past decade. However, should our surprises come to pass, it’s possible 2023 may well turn out to be a rerun of the previous year, with old economy and value stocks potentially benefiting UK markets once more.”