The BT Group – CLASS A Common Stock (LON: BT.A) share price edged lower today amid rumours that one of its largest shareholders, Deutsche Telekom, was about to make an offer for the company, given that it owns about 12% of BT’s outstanding shares.
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Several factors could trigger a takeover attempt by Deutsche Telekom or any other deep-pocketed buyers, such as private equity firms. Luckily for BT, the telecoms company has been working on defence against a potential takeover since 2021.Â
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BT enlisted the services of Robey Warshaw, a boutique advisory firm employing the former chancellor George Osborne in 2021 after the French-Israeli telecoms billionaire Patrick Drahi began building a stake in the company… The billionaire now owns 24.5% of BT.
Deutsche Telekom could also be looking to capitalise on BT’s CEO, Philip Jansen, being set to step down early next year, potentially creating a leadership vacuum at the firm. However, BT’s head of consumer business Marc Allera is viewed by insiders and investors as a ready successor.
Furthermore, if Deutsche Telekom decided to partner with billionaire Patrick Drahi and submit a joint bid for the company, they would likely succeed. Investors also worry that a Labour Party government in the UK would seek to renationalise BT Group given its vital services and sensitive government contracts.
Therefore, the window of opportunity for a takeover is slim at best, and any potential bidders for BT should move fast in submitting their bids. Still, all is not rosy at BT since the company has a massive debt burden of about £14 billion, excluding leases.
The telecoms company is also in the middle of deploying new fibre optics cables across the UK to replace old copper telephone wires, with the program being budgeted to costs about £15 billion. The massive capital expenditures will be a drag on the company.
BT’s share price has been unable to rally higher due to analysts' and investors' fears about the impact of its massive investments on profits and dividend payouts. Recent comments from Deutsche Telekom’s CEO indicate that he could plan to bid for BT.
*This is not investment advice.
BT Group share price.
The BT Group share price edged lower amid rumours of a potential takeover by Deutsche Telekom.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
