Rumours of a Collins Stewart sale resurface
Thursday 14 July 2005
Observers of the sector believe that several smaller finance houses are examining a bid for Collins Stewart, and that Close Brothers - which owns a significant fund-management arm, the market-making business Winterflood, and a growing corporate-finance business - has emerged as one of the most credible bidders. Close Brothers shares dipped 5.5p to 763p yesterday.
Mr Smith has repeatedly denied that Collins Stewart, which he joined in 1996, is up for sale, but rumours of bid interest refuse to die.
The attraction of the story is that there is little obvious synergy between Collins Stewart's old-style stockbroking and corporate finance work - which made the group £38.2m in operating profits last year - and the new inter-dealer derivatives broking business which Mr Smith bolstered through acquisitions over the past few years. That side of the business, which made £51.9m in operating profits, is seen as having much greater growth potential and accounts for the significant majority of Collins Stewart Tullett's £1.01bn market value.
A sale of the stockbroking arm would at least crystallise its value, which Mr Smith has argued in the past is greater than the stock market is willing to believe. Collins Stewart Tullett shares fell 1.5p to 477p.
Dealers were also excited yesterday by a surge of interest in Matalan, the discount stores group that is regularly tipped as a takeover target for bigger retailers with an interest in its portfolio of out-of-town stores. Asda is often in the frame.
Matalan's stock has performed well since results last week which showed that, although sales are falling, profits are holding up thanks to improved efficiency throughout the business. It closed at 190.25p, up 5p,in volume not seen on more than a handful of days since the company floated. More than 4 per cent of the company's shares went through the Stock Exchange, and day traders were particularly active in the expectation of an imminent bid.
The stock market resumed the upward trend that has been halted on only two sessions in the past dozen. Buoyed by bid chatter and positive sentiment towards the heavyweight banking and oil stocks, the FTSE 100 ended up 28.7 points at 5,245.9, another three-year best. The banks, which account for about one-fifth of the value of the blue-chip index have been rising on hopes that interest rate cuts are imminent, taking some of the pressure off the customers who have taken out loans, and holding out the prospect of a renewed uptick in mortgage lending soon. HBOS (up 16.5p at 891p) and Northern Rock (up 10.5p to 823.5p) were the two stocks singled out by Goldman Sachs as it turned more positive on the sector. Other notable share-price rises included Royal Bank of Scotland's 21p climb to 1,738p, HSBC's 13.5p jump to 911.5p, Alliance & Leicester's 2.5p rise to 898.5p, and the 7.5p gain for Barclays, at 571p.
Much of what went down on Tuesday went back up again yesterday. Provident Financial has unsettled the car dealers by saying its Yes car-credit business was feeling the force of a consumer slowdown, but yesterday Reg Vardy said it was enjoying pretty good sales, particularly for company cars. So while Reg Vardy shares were up 13p at 547p, Inchcape and Pendragon were also motoring ahead, up 38p at 2,019p and 5p at 303p, respectively. Even Provident Financial bounced 1.5p to 674p.
There was a big share sale by Ajit Patel, the chief executive of Goldshield, who is on police bail in a Serious Fraud Office investigation into claims that the drug company was among several defrauding the National Health Service. His investment vehicle sold 400,000 shares - worth £1.05m - the proceeds of which will be split between Mr Patel and his brother. Goldshield shares were up 1p to 268.5p.
Shares in the nightclubs owner Urbium got their groove on, up a round 100p at 930p. The company rejected the advances of Regent Inns, which bid 975p a share, but said that other financial bidders had asked to dance. Urbium's shareholders are hoping for a bidding contest, but Regent's appeared content that it has left the floor, since its shares were unchanged at 78.5p.
Speculative traders were buying into Biofuels Corporation, the biodiesel company which has preliminary results due this morning. They were hoping for a more positive outlook than that given in April, when the company said the demand for biodiesel was not proving as strong as hoped. The stock was 6p better at one point, but closed up just 0.5p at 145p as more cautious traders took their profits.
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