Market Report: Molson Coors bid talk sets SABMiller fizzing
Tuesday 09 October 2007
Traders were getting the rounds in early yesterday, as bid rumours re-emerged in the brewing giant SABMiller. The stock rose 1.03 per cent to 1,466p in early morning trading after talk of a bid from Molson Coors, one of the world's largest brewers.
The talk first came from the spread-betters, who saw some of the same clients who had piled into Abbot Group before it admitted bid talks last week take strong positions in SAB. There was also some vague talk of a bid from Belgium's InBev, although that had previously done the rounds following a broker note.
The stock was bolstered by Credit Suisse which slapped a 1,550p target price on SAB because of the potential prospects for growth in South America.
Investors buoyed by the news bought into sector rival Scottish & Newcastle, which is perennially doing the rounds as a takeover target. It closed up 2.05 per cent at 622p.
Top of the leaderboard was Northern Rock, which continues to prove the most volatile stock on the top tier. It started the week on a positive note, rising 8.83 per cent to 172.5p after reports of possible £10bn funding from Citigroup. Investors are still waiting on a bid from JC Flowers, the private equity firm, and reports of interest from two more buyout firms, Blackstone and Apollo, helped strengthen the stock.
Another financial stock, Standard Chartered, storm-ed up the risers, adding 23p to 1,640p after support from Merrill Lynch. The US broker added the bank to its Europe-1 list, reiterating its "buy" rating. It said the group could use its exp-erience in emerging markets, as well as its international platform, to take market share from existing players.
The market opened quietly and retreated in the late morning as vertigo set in. Sellers outnumbered buyers as traders didn't believe the FTSE 100 could hold its 6,592 levels, and the index closed down 54.9 points at 6,540.9.
The miners led the market down, with one of last week's stronger performers, Kazakhmys, the worst hit. It closed down 5.89 per cent at 1,502p after it revealed its copper cathode production would suffer this year after a flood at one of its mines. Vedanta Resources was close behind, down 4.31 per cent to 2,086p.
One broker withdrew its support for Royal Bank of Scotland after the banking group declared victory in the takeover battle for ABN Amro. The stock softened 9p to 560.5p after Bear Stearns said the deal will weaken the balance sheet, reduce earnings per share and lower returns on equity in the short term. It added: "Longer term, RBS should be able to extract significant value from the businesses it is acquiring from ABN Amro."
On the second string, shares in SSL International, the owner of Durex, were up in anticipation of a trading statement tomorrow. There was also vague talk of a potential bid in the offing. One trader dismissed the chat, saying: "This tends to come back again and again, with Reckitt Benckiser normally the rumoured bidder." It closed up 2.21 per cent at 485p. Carpetright was top of the risers, up 4.13 per cent to 1,161p as takeover rumours re-emerged.
Regus Group, the real estate company focusing on providing work-spaces, fell after Citigroup downgraded the stock to a "sell". The broker said it believes Reg-us's key lead indicator is US downtown office occupancy growth and that is slowing. The US made up 40 per cent of the group's gross profits last year. The shares shed 3.17 per cent to 122p.
There was one eye-opening riser among the small caps. Onesource Services shares roared up more than sevenfold after it agreed to a takeover at a premium that had the market scratching its head. The stock, which closed at just over £6 on Friday, revealed it had agreed an offer from ABM Industries worth £48.10 per share. The Conservative peer Lord Ashcroft is chairman of the group and holds 74 per cent of the stock. One trader said: "I've never seen such a premium. It's such an illiquid stock that it goes unnoticed most of the time." The shares closed up 3,785p at 4,450p.
Another company to admit talks was Alkane Energy. The group rose 14.67 per cent to 21.5p after saying it has held informal talks that could lead to an offer.
At the bottom, Emerging UK Investments slumped 45.27 per cent to less than 2p and was suspended in the morning. It was forced into a suspension from AIM after its nomad Beaumont Cornish resigned.
The iconic haulage group Eddie Stobart has not had an easy welcome to the market. The lorry company which officially became Stobart Group last week, after a reverse takeover by Westbury Property Fund in August, has since fallen from 149p to 113p. One trader said there was a rumour of a seller trying to get out of the stock and traders had been keen to shake the investor out by smacking the price. He added: "It looks massively oversold."
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