Market Report: PepsiCo rumours add a little fizz to Britvic
Tuesday 11 July 2006
Rumours about a bid for the soft drinks group Britvic have been doing the rounds for a few weeks now, and, with suitor PepsiCo coming up smelling of roses in the industrial espionage case with arch-rival Coca-Cola, many traders believe that a bid will come this week.
The chat in the market is that Britvic investors will be open to offers after the company warned on profits twice in its first six months as a publicly quoted company, although trading is still thought to be under pressure due to consumers shunning fizzy, high sugar-content drinks. Even so, PepsiCo is rumoured to be considering a 235p-per-share offer, valuing the group at £720m including debt, the price the shares were floated at last December.
One trader said: "If an offer comes for Britvic that will allow investors to exit the shares at a marginal loss, I expect whoever makes the offer will have their arm bitten off. Two warnings in six months has left the management with a real credibility issue, and for most investors Britvic is something they will want to forget in a hurry." Shares in Britvic rallied 7.75p by the close to 203p.
A bullish update from the broker Dresdner Kleinwort on Vodafone gave the shares a boost ahead of what could be a very interesting month for the mobile network operator. Its new chairman, Sir John Bond, is due to take up his role at the end of the month and the stock is due to go ex a 15p special dividend on 28 July. Perhaps of greater interest is the fact that US partner Verizon is also due to complete on the $16bn (£8.7bn) sale of its directories operations, paving the way for a cash offer for the 45 per cent stake in Verizon Wireless owned by Vodafone. Verizon is thought to want to thrash out a deal, and Dresdner reiterated its 165p target for Vodafone. The shares added a penny to close at 119.75p.
London shares struggled for direction in a quiet day of trading, with the index drifting in single digit losses for most of the session before a slight recovery at the close saw the FTSE 100 add 8 to close at 5896.9.
The retailer Marks & Spencer found plenty of buying support before this week's trading update. The feeling among traders is that the company will revise guidance upwards with trade continuing to outstrip its rivals. M&S shares closed 2.5p better at 583p.
An upbeat note on the property sector from the US broker Merrill Lynch was not enough to prevent a small sell-off in the large-cap property stocks. Of the four sector representatives in the blue-chip index, only British Land managed to make any headway against the falling market, closing 3p better at 1,332p. Merrill increased its net asset value forecasts for Liberty International and Hammerson, but with both having attracted strong support recently neither stock found many buyers, closing 8p worse at 1,098p and 30p lower at 1,211p respectively.
It will be a nervous week for Enodis investors. The commercial oven and refrigerator group's two US suitors, Manitowoc and Middleby, have until next Monday to make a full offer for Enodis or walk away for six months. It looks like traders are backing another bid at around 225p, with Enodis closing well up the FTSE 250 leaderboard, 1.5p firmer at 201.5p. If no bid comes, the stock could retreat to below the 195p Middleby offered.
It looks like the private equity group 3i has beaten off the hedge fund Trafalgar Asset Management and will take control of Mayborn Group in an agreed deal worth 500p per share. Management will keep the tube plastics operations, valued at 13p per share. There had been some concern that the offer would fail, but yesterday's EGM passed all resolutions giving 3i 84 per cent of the stock. Mayborn remained unchanged at 503p while 3i firmed 12.5p to 915.5p.
Market-makers said a "bear squeeze" was the reason for iSoft's 9.5p improvement to 62.5p, as short traders booked profits and bought the shares back. There is still no news on when the company will report full-year numbers after the last-minute postponement of numbers, due last Thursday.
CCH International, the Islamic finance group, pushed further ahead as brokers and traders speculated that the group will continue the exponential growth shown in the last set of figures. The shares added another 2p yesterday to close at 26p, an all-time high.
Changes to the regulatory environment for mobile content providers in China, which knocked almost 60 per cent off the Monstermob share price, also dealt a blow to IGM. The stock has not had a happy start to life as a quoted company; the shares fell more than 20 per cent in the first week of trading after listing on AIM in late May at 50p. Investors continued to desert the stock yesterday, sending it 6p down to a new low of 15.5p, 69 per cent lower than the placing price.
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