Market Report: Investors take a flutter on Bwin.party bid talk
Tuesday 16 August 2011
Takeover talk was on the cards for Bwin.party yesterday, as investors mulled over whether to take a gamble on the online gaming group after rumours emerged it could be in line for an approach from the US.
The company has existed in its current form only since March, when the merger between PartyGaming and Austria's Bwin was completed. Since then, however, a steady slide – exacerbated by the sharp falls seen across the markets in the past few weeks – has resulted in its share price plummeting by 45 per cent.
The move has prompted chatter that the world's biggest listed online gambling group may become a target, and yesterday vague speculation suggested the casinos group Wynn Resorts, whose chief executive is the Las Vegas billionare Steve Wynn, could be a potential aggressor.
With the gossip claiming a possible bid could reach as high as 170p a share, Bwin.party managed to touch 107.8p during trading before closing at 105.7p, a rise over the session of 1.7p.
Not everyone agreed with the chatter, however, with one trader saying acquisitions in the sector were unlikely until there was further clarification over the potential regulation of online gambling in the US.
The recent rumours came after mutterings last week suggested potential aggressors for Bwin.party could come from closer to home, with William Hill – up 1.9p to 224p – one of the names linked.
Those in the City returning to their desks after the FTSE 100's volatile movements last week would not have been blamed for being somewhat fearful over what the days ahead would hold, yet the top-tier index ended up powering forwards 30.55 points to 5,350.58, its third consecutive session on the rise.
Nonetheless, traders were still cautious. "We are not out of the woods yet," said one, who added that he would feel more confident if the banks managed a sustained rally as well. That was certainly not the case yesterday as – with nerves raised ahead of today's key meeting between German Chancellor Angela Merkel and France's President Nicolas Sarkozy on the eurozone crisis – the sector was left in the red.
Following reports suggesting "ring fencing" proposals could be tougher than anticipated, Barclays dropped 3.85p to 183.35p, while Lloyds Banking Group was 0.59p behind at 33.23p. Meanwhile, HSBC fell 4.6p to 547.2p despite being picked by JP Morgan Cazenove as one of the more attractive stocks after the recent sell-off.
Saying that "equity markets are oversold and [we] see many signs of panic", the broker added that "indiscriminate selling is offering great opportunities if one can look through the current extreme volatility."
Also among its picks were Amec, which finished 43.5p stronger at 949p, and Xstrata. The latter was lifted 21.5p to 1,092.5p, and – with data from Japan showing its economy for the second quarter had shrunk less than feared – the rest of the miners were also rising.
SABMiller pushed up 15p to 2,105p after Nomura raised its glass to the Grolsch brewer and toasted its emerging markets exposure. Cutting its growth expectations for the amount of beer consumed in Western Europe and US, the broker pointed out that around 84 per cent of SABMiller's profits come from outside these regions and raised its recommendation to "buy" as a result.
However, Nomura's analysts were less keen on Diageo, dropping its advice to "neutral", thanks to its new estimates that spirit volumes Stateside will rise only 1 per cent next year, although the owner of Smirnoff vodka and Bell's whisky still ticked up 11p to 1,189p.
Down on the FTSE 250, there was a definite appetite for Domino's Pizza as the pizza delivery company – recently the subject of bid rumours – surged forwards 24p to 486.8p, helped by Peel Hunt upgrading its rating to "buy".
As well as claiming that investors now have "a rare second chance to buy into Domino's iconic marketing enterprise", the broker's analysts added that they would "also take seriously recent social developments which, even after calm has been restored, may result in a subtle shift between the considerations for going out as opposed to staying at home".
The wooden spoon on the mid-tier index was taken by Michael Page, with the recruiter dropping sharply as it released its interim results. The company ended up shedding 32.4p to finish at 368p after saying it was being knocked by hiring freezes among the European banks, several of which have recently announced large job losses.
It was a good session for the explorers operating off the coast of the Falkland Islands, with Rockhopper increasing its estimates for its Sea Lion discovery. As a result it spurted up 19.25p to 237p on the Alternative Investment Market, while Desire Petroleum – which operates in the same region – was 2.25p higher at 19.25p.
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