Shares in BT Group PLC (LSE:BT.A) climbed today in what appeared to be relief that the UK government won’t make major shareholder Altice sell down its stake due to national security concerns.
French telecoms group Altice is owned by billionaire Patrick Drahi, who has built up a sizeable stake in the UK’s former monopoly.
As BT owns the national broadband network via its Openreach infrastructure arm, the Department for Business, Energy and Industrial Strategy referred the latest 5.9% acquisition for a review on the grounds of national security.
This purchase, now approved, takes Drahi’s holding to 18%.
It was not exactly clear why Downing Street moved to review the deal, as the stated powers of business secretary Kwasi Kwarteng under the National Security & Investments Act normally would only call for a decision on whether or not to block any external stake when it rises above a 25% stake.
As analyst Polo Tang at UBS said, it was not clear whether Altice was seeking to increase its stake beyond 25%.
But with June seeing the expiry of an undertaking by Altice not to make an offer for the whole of BT, investors and some analysts seem to be anticipating the government’s non-intervention will trigger more stake-building – either by the Frenchman or someone else.
“While he is not forced to reduce his stake, you cannot rule out moves to increase it further,” said analyst Paolo Pescatore at PP Foresight. “Feels like the end game seems to be a takeover."
However, Drahi has looked to play down any talk of a takeover, insisting he and Altice hold the current management “in high regard and remain fully supportive of their strategy”.
Moreover, while the move to 18% has been waved through, the government said it will continue to assess acquisitions “on a case by case basis, so any future transaction could be subject to a separate assessment”.
The government, which has powers under the National Security and Investment Act of 2021 to scrutinise and potentially intervene in certain acquisitions, said it “will always act to protect the UK’s critical national telecoms infrastructure if we judge action is necessary”.
As well as the National Security & Investments Act, UBS’s Tang also noted that another possible barrier to a takeover of BT is the BT Pension Scheme, where the deficit “could widen materially under a solvency basis that could be triggered by a change of control”.
Nevertheless, if nothing else, Drahi is a deep-pocketed investor and clearly sees something that many others do not.
As such, as Pescatore says, BT remains firmly a company for all key stakeholders, including the UK government, to continue monitoring closely.