Market Report: Bid talk circles JJB as tycoon takes 10 per cent stake
Saturday 15 October 2005
The entrepreneur has built up the investment through his Sports World International vehicle, which he also uses to control the Sports Soccer chain, a rival to JJB. Mr Ashley's announcement sparked speculation that he might want to bid for the whole group. However, analysts were quick to rule out such a scenario. They pointed out that such a move would give him a market share of more than 50 per cent of the sportswear arena, a figure that would be unacceptable to the competition authorities.
Richard Ratner, at Seymour Pierce, said: "What Mr Ashley's motives are we do not know, especially as he is killing JJB every time he opens one of his shops near an existing JJB store." Some believe Mr Ashley may look to make a quick turn from his minority stake in JJB. Earlier this year, he took a 4.6 per cent shareholding in Umbro and sold it quickly afterwards at a small profit. He is also said to have made money from an investment in the discount retailer Matalan.
Elsewhere, Aegis fell 5.5p to 132.5p, with trading in the stock dominated by speculation that Publicis will abandon its plans to buy the UK media group. After the close of the market, the French advertising group confirmed the rumours, saying a tie-up was "not in the best interests of its shareholders". Gains on Wall Street, thanks to US data which showed a smaller-than-expected rise in inflation, buoyed the London market, pushing the FTSE 100 up 9 points to 5,275. Mike Lenhoff, at Brewin Dolphin Securities, argued that equity markets on both sides of the Atlantic are oversold and due a rebound. Mr Lenhoff said: "The FTSE 100 is not quite as oversold as the S&P 500 but it too is attractively valued." He calculates that the UK's blue-chip index trades at just 12.3 times forward earnings. The FTSE 250 added 4 points to 5,275.
BSkyB rose 11.5p to 535.5p after the satellite broadcaster confirmed it may use the proceeds from its £1bn bond issue to fund acquisitions. Recent speculation has suggested that Sky might be tempted to enter the broadband arena via the purchase of one of the UK's smaller service providers. These include Easynet, 7p higher to 96.5p, PlusNet, up 0.5p to 255.5p, and Pipex, steady at 8.75p.
William Morrison Supermarkets gained 1.75p to 173.25p despite bearish comments from Deutsche Bank. The German broker warned its clients that next week's first-half results from the food retailer are likely to be disappointing. "We don't expect good news on trading or current conditions," Deutsche said, which cut back its price target on the stock to 180p from 200p.
Diageo gained 17p to 830p after UBS upgraded its rating on the drink's giant to "buy" from "neutral" and set a 960p price target. The Swiss broker believes that Diageo's forecast of 4 per cent growth next year is too cautious given the strong momentum it is enjoying in the US. UBS expressed surprise at the recent underperformance of the group's shares which seem to have ignored positive news flow from the company, such as a bigger-than-expected stock buy-back programme.
Among small caps, 2Ergo ticked 1p higher to 188.5p after the software group announced the roll-out of a series of its services in the US. IndigoVision jumped 13p to 167p after the purchase of 10,000 shares at 161p by Barry Keepence, the chief technology officer. Share dealings by IndigoVision directors tend to be a good indicator of the stock's future performance. At the start of last year they gobbled up stock at 39p and repeated the exercise in June, at 59p, and in December, at 73.5p.
Copper Resources ticked 1p higher to 38p as investors responded to Thursday's late-breaking director share purchase. Mitchell Alland, the executive vice chairman of the miner, disclosed the acquisition of 100,000 shares at 37p after the bell.
Alphameric was steady at 92.5p as brokers struggled to clear a large seller from the market. Asia Energy soared 17.5p to 652.5p after the coal miner boasted that the Asia Development Bank is interested in financing its Bangladesh project. Cambrian Mining, which has an 11.3 per cent stake in Asia Energy, rose 2.5p to 148.5p.
Finally, Claims People fell 0.13p to 1.62p as Seymour Pierce cut its recommendation on the provider of support services to the insurance industry. Slashing its stance to "hold" from "buy", the broker warned that the benign weather in the UK will impact the group's financial performance going forward. The broker believes the next two month will be crucial for Claims People, which specialises in assessing insurance claims.
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