MARKET REPORT : Carlton emerges as clear favourite to buy Rank films
Friday 28 February 1997
The deal, which could be announced as early as next week, will complete a pounds 300m deck-clearing programme begun nine months ago when Andrew Teare became Rank's new chief executive.
A week ago Mr Teare confirmed plans to sell the film distribution business and said he had received numerous expressions of interest.
Names in the frame included PolyGram, the music and film group, and VCI, the video publication company chaired by former Channel Four boss Michael Grade.
But Carlton, keen to expand its film activities, is expected to land the prize for what will almost certainly be seen as a knock-down price.
Rank is keeping Pinewood Studios as well as its film processing and video duplication activities. That legendary Rank symbol - the man with the gong - will also remain.
Yesterday Carlton's shares clawed back some of their recent losses, closing 3p higher at 531.5p. Shares in Rank ended 8p lower at 420.5p.
Although analysts are likely to be disappointed with the price Rank fetches for its film distribution arm, they are gradually warming to Mr Teare. Merrill Lynch recently changed its recommendation from neutral to accumulate on the prospect of a share buy-back underpinning the shares.
Separately, shares in Capital Corporation rose 11.5p to 213p as speculation persisted of a second bid for the upmarket casino operator. Rank and Ladbroke are being tipped to top London Clubs' hostile, all-paper offer of pounds 181m.
The FTSE-100 index closed at an intraday high, up 9.9 at 4339.2 as dealers discounted a landslide Labour victory in yesterday's Wirral South by-election. Sentiment was helped by a steady start on Wall Street and a stream of generally upbeat company results.
Lasmo was in demand, rising 7p to 246p, after recommending a 60 per cent increase in the dividend - the first since the oil giant bought Ultramar six years ago. A healthy 6.6 million Lasmo shares were traded as a two- way pull developed with Merrill Lynch urging clients to buy, SocGen suggested taking profits and Credit Lyonnais Laing preferring Enterprise, 10p firmer at 629p.
Results from Abbey National, up 4.5p to 768p, also pleased with Schroders among several brokers recommending the bank's shares. Not all news was good news, however. Bank of Scotland was the worst-performing blue chip and actively traded after warning that profits at its 51.5 per cent-owned Australian Bank West subsidiary would be about 5 per cent lower than expected. The shares shed 14.5p to 341p in volume of 15.5 million.
The day's most active issue was Allied Carpets on volume of 17.7 million after ABN Amro Hoare Govett, the company's broker, placed venture capital group Cinven's remaining 10 per cent stake with some 30 institutions at 275p.
ABN Amro Hoare Govett made a turn of over pounds 200,000 on the deal, having picked up Cinven's stake at 272.5p.
Cinven organised the original buyout of Carpetland from Lowndes Queensway in 1991 when it cut its stake in the carpet retailer form 13.2 per cent. Two years later it backed the acquisition of Allied Carpets. Superstore group Asda sold its entire 41 per cent stake in Allied at last year's flotation price of 215p. Last night the shares closed 1.5p lower at 280p.
Cheshire-based building contractor Amec advanced 9p to 121.5p after confirming the acquisition of a 41.6 per cent stake in French construction group Spie Batignolles. Amec has teamed up with Spie's employees to complete the management buyout from French rival Schneider.
Pharmaceuticals were again in demand. Medeva moved to a record high of 315.5p, 5p healthier on the day, after SocGen said the shares were still undervalued.
Also entering uncharted territory was Cantab Pharmaceuticals, 27.5p to the good at 900p on news of another joint venture, while a positive analysts' meeting lifted AIM-listed Stanford Rook 20p higher to 560p.
In the technology sector shares in Eidos added 47.5p to 970p ahead of today's interim results while further consideration of this week's results from Sema sent the shares 12.5p higher at 1,262.5p. Pace Micro Technology remained weak, closing a penny down at 85p. This week's profits warning caused many burnt fingers.
r Salomon Brothers has turned positive on cables group Delta. Its largest market - UK housing - represents about 35 per cent of sales and is recovering strongly while the market may have exaggerated the threat from currency movements. A dividend cut is unlikely given the strong cash flow and improving earnings trend. The broker looks for pre-tax profits of pounds 69m this year rising to pounds 83.3m in 1998. That puts the shares, up 4.5p at 351.5, on a prospective p/e ratio of 13 falling to 10.
r Shares in Incepta, the sales promotion group, are due to resume trading on Monday now that Citigate, the larger financial public relations and marketing firm, has completed its pounds 34m reverse takeover. They were suspended at 21.75p in December.
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