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London is the European stock exchange most at risk of suffering big departures to the US, according to a ranking compiled by the Financial Times identifying large companies with the strongest business case to consider a New York listing.
The FT assessed 111 European companies, each with a market capitalisation of at least $10bn and each with their shares trading at a discount to US rivals, to determine which have the strongest case to switch to a New York listing. London-listed groups made up just a fifth of the total — but half of the top 10, and 18 of the top 50.
The finding is further evidence of London’s vulnerability compared with Paris, Amsterdam and Frankfurt as higher US economic growth forecasts and a larger pool of investors strengthen the business case for a move.
Many groups may decide against switching listings for reasons including fear of political backlash and regulatory hurdles. But yawning valuation gaps combined with a more aggressive US industrial policy mean many will feel investor pressure to explore spinning off their US operations. The trading discount also makes them potential takeover targets.
A company’s ranking is based on its valuation discount compared with a group of US peers, the share of its revenues generated in the US and its proportion of North American investors, as calculated and compiled by data provider FactSet. The greater each of these metrics, the higher the company’s position (see methodology below).
London-listed Irish construction group CRH, which will put its decision to move its primary listing to New York to shareholders on June 8, tops the league table. It is followed by cigarette maker British American Tobacco and drugmaker GSK, which generates almost half its revenues in the US. Dutch medical devices group Philips ranks fifth.
The large London-listed mining groups also feature in the ranking. Rio Tinto ranks 14th and Anglo American — whose spin-off AngloGold Ashanti has announced a move to New York — comes in at 30th, ahead of Glencore (35th).
Other European exchanges are not immune. Italian machinery group CNH Industrial (fourth), has announced its retreat from Milan to make New York its sole listing. German diagnostics group Qiagen (28th) said it “periodically” reviewed its dual listings in New York and Frankfurt.
Crisis in European equities
This is the third, culminating part of a series exploring why some of Europe’s most promising companies are fleeing to America’s capital market
Part 1: Britain’s ‘capitalism without capital’: pension funds that shun risk
Part 2: Why Europe’s stock markets are failing to challenge the US
There are numerous, sometimes insurmountable obstacles to a move, including political opposition, national security and regulatory complexities — banks and defence companies in the ranking are deeply rooted in their respective homelands. Oil group Shell (78th) decided against such a move, while the chief executive of France’s TotalEnergies (54th) told investors it was not an option. BP ranks 42nd.
The economic pull from the US can be felt regardless of a valuation gap: London-listed Flutter, the world’s largest listed gambling company, does not feature in the ranking because it is trading at a premium to smaller US rivals. But the Irish group, which owns US betting platform FanDuel, will launch an additional US listing this year, before seeking shareholders’ approval on moving its primary listing there in the next few years.
Some smaller companies — not captured in the sample — also have reasons to look across the Atlantic. London-listed drugmaker Indivior is planning a secondary listing in New York. Events organiser Informa “would consider” moving to the US given the size of its American business, according to an insider. Dublin-listed consumer goods group Glanbia, which derives more than 80 per cent of its revenues in the US, will start reporting its results in US dollars this year.
But for some the cost and distraction of a move may outweigh the benefits. Jon Steinberg, the American chief of London-listed magazine publisher Future who is spearheading a US-first strategy, said he was not considering switching to New York because the business would be too small to catch investors’ attention.
1. CRH
Listing: London
47%
Discount
58%
US revenues
19%
North American investors
With three-quarters of its earnings coming from the US, the Irish building materials group says its decision in March to shift to a US listing is on course to receive “strong support” from shareholders at an extraordinary meeting on June 8.
A US listing would make shares in the acquisitive company more attractive as CRH trades at a discount to US peers. It also believes it would boost its ability to bid for US infrastructure contracts and takeover targets. Jude Webber
2. British American Tobacco
Listing: London
31%
Discount
46%
US revenues
38%
North American investors
The maker of Dunhill and Lucky Strike cigarettes has been listed in London for more than a century, but that has not stopped some shareholders from encouraging it to move to the US. Rajiv Jain, founder of US investment firm and top-five BAT shareholder GQG, told the FT in March that he had urged management to switch its primary listing, saying it “makes no sense” for BAT to remain a FTSE company and that it was “an orphan in Europe”.
Jain argued that not only was the world’s biggest tobacco company by sales undervalued in comparison with US peers, its ownership base was also largely in the US. Philip Morris International and Altria, which share rights to the Marlboro brand, trade at a blended multiple of 12 times next year’s earnings, while BAT is on just 7.5 times. Environmental and social mandates have also caused European funds and financial institutions to divest from tobacco stocks in recent years. People close to BAT insist it has not actively discussed switching its listing to the US. Oliver Barnes
3. GSK
Listing: London
35%
Discount
50%
US revenues
22%
North American investors
Like many other pharmaceutical companies, GSK generates almost half its sales in the US because of the country’s high drug prices. Until last year, the UK company’s chief scientific officer was based on the US west coast, where he ran several partnerships with early-stage companies. But Hal Barron has now stepped down from the post (he remains on the board) and been replaced by UK-based Tony Wood. The group has a secondary listing in the US, but a person familiar with the matter said there was a “zero per cent chance” that it would move. Hannah Kuchler
4. CNH Industrial
Listing: Milan
42%
Discount
35%
US revenues
27%
North American investors
Dual-listed CNH, formed a decade ago by the merger of US-listed CNH Global with the Italian billionaire Agnelli family’s Fiat Industrial, said in February that it would give up Milan in favour of a single listing on the New York Stock Exchange.
The company, which makes machinery and technology for agriculture and construction, hopes to complete the delisting by early 2024. Following the spin-off of commercial vehicle manufacturer Iveco in 2022, most of the group’s trading activities moved to New York in a shift CNH said reflected “that the company’s new business profile and investor base fit better with a single US listing”. Silvia Sciorilli Borrelli
5. Philips
Listing: Amsterdam
33%
Discount
41%
US revenues
26%
North American investors
The Dutch conglomerate, which is focused among other areas on medical equipment for diagnostic imaging, said almost half its €17.8bn in global sales last year were generated in the US.
The company, which has its main listing in Amsterdam and a secondary listing in New York, said there were “no plans” to change that. Donato Paolo Mancini
6. Heidelberg Materials
Listing: Frankfurt
68%
Discount
19%
US revenues
22%
North American investors
One of the world’s largest building materials groups, Heidelberg was founded in 1874 with a focus on cement — which until late last year featured in its name. The new branding comes as the company seeks to become more environmentally sustainable.
It said it was not currently considering moving its listing to the US, adding that it was in constant dialogue with its investors and analysts and that “we are convinced that the transformation Heidelberg Materials has embarked on will eventually also reflect a significant re-rating of our company”. Patricia Nilsson
7. WPP
Listing: London
32%
Discount
36%
US revenues
27%
North American investors
The UK’s largest advertising group generates more than a third of its revenues in the US, where it competes with New York’s “Mad Men” agencies for the cheque books of big US tech and consumer groups. American rivals tend to be valued at higher multiples, which makes a move a potentially attractive prospect. However, while people close to the company say relocation could always be an option, there is no move being worked on. WPP, which already has an American depositary receipt that trades in New York, declined to comment. Daniel Thomas
8. Bayer
Listing: Frankfurt
48%
Discount
31%
US revenues
20%
North American investors
The seeds-to-pills conglomerate has been one of Germany’s worst-performing blue-chip companies in recent years, thanks to its ill-fated $63bn acquisition of US agrochemicals group Monsanto, which exposed Bayer to billions of dollars in litigation costs tied to the weedkiller glyphosate. Activist investors want to split the group’s pharmaceuticals business from its crop science unit to optimise its valuation. Incoming chief executive Bill Anderson said he would review all options for the company, including a break-up. The company said it had no plans to move its listing. Olaf Storbeck
9. BAE Systems
Listing: LONDON
20%
Discount
48%
US revenues
42%
North American investors
Trading at a discount to US peers and with significant American activities, analysts have in the past suggested that Europe’s biggest defence company should spin off its US business to create a separately listed company.
But BAE has always maintained that its geographic spread is a strength, and the UK government, which retains a golden share, would be unlikely to support such a move.
The war in Ukraine and the prospect of higher government defence spending have helped narrow the valuation gap as BAE shares have soared. The company said it had no intention of listing in the US or divesting its business in the country. Sylvia Pfeifer
10. Universal Music
Listing: Amsterdam
31%
Discount
50%
US revenues
20%
North American investors
The world’s biggest music label has always had a US centre of gravity, even if former parent Vivendi was based in Paris. Its biggest artists are in the US, as are 20 per cent of its shareholders and half its revenues.
Vivendi spun out the group in 2021, placing its headquarters and listing in Amsterdam for financial and legal reasons. The likelihood of relocating or dual-listing in the US appears slim — the operations are already there and its biggest shareholders Vincent Bolloré and Vivendi benefit from being able to sell down their stakes in Europe. Universal Music declined to comment. Leila Abboud and Anna Nicolaou
Check the Top 50 ranking here:
Methodology
The ranking was created as an equally weighted score across three metrics:
-
the gap between a company’s forward fiscal year end price/earnings ratio and the median valuation of a basket of US competitors, based on FactSet’s 129 industry classifications and customised by the FT
-
its standardised share of US revenues
-
the percentage of North American shareholders on its books
For instance, British American Tobacco’s trading discount is calculated by comparing its valuation with a basket of US tobacco companies including Altria and Philip Morris.
The 111 companies in our sample were drawn from the UK’s FTSE 350 and Europe’s Stoxx 600, excluding investment trusts, asset managers and real estate groups. They have a market capitalisation of at least $10bn, generate at least 2 per cent of their revenues in the US and do not show a trading premium to US peers.
Companies have a higher ranking if they have a wider trading discount, higher share of US revenues and a higher proportion of North American shareholders.
The standardised US revenues figures are drawn from a proprietary calculation by FactSet that does not always match a company’s own reported numbers precisely.
All the data is as of May 22 2023.
Additional data analysis by Ella Hollowood
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