Market Report: Talk of Persimmon swoop adds shine to Wimpey
Saturday 03 September 2005
Among the most popular tales recited by brokers was of a move by Persimmon, down 6p at 821p, to buy its rival housebuilder George Wimpey, up 3p at 417.25p.
Those who know the housebuilding sector well agreed that the tie-up makes sense for Persimmon, pointing out that if it were to execute such a coup the group would be propelled into the FTSE 100.
At present, Persimmon is dependent on the stagnant UK housing market, but the purchase of Wimpey would give it access to the booming US market. Commenting on the speculation, Evolution Securities said: "We think a bid for Wimpey, at even a 20 per cent premium to its current share price, would be good news for Persimmon."
But the broker warned that a takeover is unlikely to be imminent. Persimmon will probablychange its chief executive next year and, according to Evolution, the incumbent, John White, is unlikely to take on such a major initiative as the purchase of Wimpey at the end of his reign.
Meanwhile, in the FTSE 100, Scottish Power, up 13p to 525p, Lloyds TSB, 7p higher at 465.5p, and BOC, 44p stronger at 1,128p, were boosted by bid rumours.
Over the summer, the trio have been repeatedly tipped as vulnerable to takeover. Gossips suggesta move on BOC may come as early as next week, and Basf, the German chemicals maker, was the latest company to be talked of as interested in buying the industrial gases group. Credit Suisse First Boston was sceptical about a Basf/ BOC deal. The Swiss broker said: "BOC doesn't fit Basf's publicly stated acquisition targets."
CSFB believes an offer for the company from another player within the industrial gases industry, possibly in conjunction with a private-equity house, is much more likely. BOC refused to comment on the speculation yesterday.
In the FTSE 250, which closed 6.2 points lower at 7,792.3,Pilkington was one of the best performers. The glass maker gained 7p to 139.5p as traders piled into the stock hoping it will receive an offer soon. More than 37 million shares were traded as, once again, investors got excited about the old story of the company being bought by its biggest shareholder, Nippon Sheet Glass.
Should the Japanese group launch such a move, it would need to persuade Pilkington's bosses to remainin their posts as Nippon lacks an international management team. This will have to be agreed before a bid takes place.
Invensys dropped 0.5p to 14.5p after UBS downgraded its stance on the engineer to "neutral" from "buy". The broker worries that despite years of restructuring, Invensys is still bleeding cash.
Somerfield rose 1p to 199.5p on word the Apax Partners-led consortium willunveil its offer for the convenience-store operator next week. If you believe yesterday's gossip, the private-equity firm's offer should come in at 225p a share. Bulls of Somerfield hope this will flush out a counter-offer from Wal-Mart. The US retail giant controls 17 per cent of the UK groceries market, and a combination with Somerfield would take this figure to 23 per cent. This is well short of Tesco's 30 per cent market share, which is why analysts believe Wal-Mart will have little trouble getting the green light for a deal from the regulators.
Jarvis, having completed its debt-for-equity swap, fell 5p to 102p amid worry about a large overhang of stock in the market. The US hedge funds who bought into the support services group through its debt have had their holdings converted into Jarvis shares.
Many of these funds are mandated to invest only in fixed-income securities and are now forced to sell their Jarvis shares as soon as they can. Whether they make a profit will depend on them getting more from the sale of Jarvis stock than they spent on buying the company's debt.
Hotgroup ticked 0.5p higher to 20.25p as DC Thomson, the Scottish publishing group, continued to add to its shareholding in the online recruitment specialist. This week, hotgroup recommended investors accept a 20.25p-a-share cash offer from Trinity Mirror. MediaZest, unchanged at 43.5p, disclosed that its chairman, the retail supremo John Lovering, raised his stake in the group to 3.5 per cent from 3.2. MediaZest, which floated in February, focuses on the growing in-store marketing industry.
Finally, Vimio enjoyed a strong debut on AIM. The group specialises in developing media distribution technology for mobile-phone networks and, having raised £5.6m at 100p, saw its shares soar to 139p by the close of business. Vimio says it needs the fresh cash to fund its expansion into the Far East.
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