MARKET REPORT : Demerger from hell remains a Thorn in EMI's side
Thursday 06 February 1997
As Thorn EMI the group enjoyed an upbeat share performance. But it has been downhill since the split and with the stand-alone showbiz and rental businesses bumping along in undignified retreat the much praised break- up is beginning to look like the demerger from hell.
Since the heavily applauded parting of the ways EMI has fallen from 1,486p and Thorn from 394p to a 200p.
At times, before the splits, the old Thorn EMI shares were nudging 1,900p with analysts suggesting they would be worth more than pounds 20, perhaps as much as pounds 23, after the demerger. Those calculations have proved to be sadly astray.
The showbiz side has been hit by worries about weaker music sales, particularly in the US, and sterling's strength. The much-vaunted takeover bid - or, indeed, any suggestion of one - has failed to materialise, leaving the shares looking increasingly vulnerable. The Thorn rental operation, the steady and dull side of the business which had been regarded as a "nice little earner", appears to have lost its way and last month told the stock market profits would fall short of City expectations.
The rest of the market returned to record-breaking ways with Footsie climbing 20.6 points to another peak of 4,281.5, as it appeared likely that domestic interest rates would remain unchanged, at least for the time being.
There was a late flurry in financials as Prudential Corporation threw its cap in the Scottish Amicable ring. Pru rose 13.5p to 554p in late trading and Abbey National, the opening bidder, slipped 5p to 782p as it indicated it might lift its own offer.
The pounds 12bn US financial merger, bringing together Morgan Stanley and Dean Witter, will add to the financial excitement.
Drug shares suffered a touch of cold turkey as Roche, the Swiss giant rumoured as a possible bidder for a wide array of pharmaceutical companies, lowered the temperature by bidding for a US flavours business. The strike immediately undermined stories of a UK bid, leaving SmithKline Beecham 9p lower at 864.5p and Zeneca 22.5p down at 1,737.5p.
Shield Diagnostic enjoyed an early rally, gaining 49p. It closed 8p higher at 257.5p.
BSkyB, on its results, led blue chips with a 30p gain to 623p. BT jumped 13.5p to 444p, highest for nearly three years. Estimates for figures, due today, have been lifted in the past few days and there is growing appreciation of the telephone giant's overseas ambitions, particularly its proposed merger with US group MCI. A rush of option trading, with Kleinwort Benson playing a significant role, was another influence. The shares reached a 486p high in the last days of 1993.
Pilkington fell 3.5p to 140.5p with Goldman Sachs said to have joined the downgrading bandwagon and BOC fell 14.5p to 948.5p with HSBC said to be offering take-profits advice.
Safeway added 11.5p to 391p on Merrill Lynch support. It sheltered behind a "no comment" to rumours it planned to buy the Irish supermarket chain, Wellworths, owned by the Fitzwilton conglomerate.
Racal Electronics, with Salomon Brothers saying buy, moved ahead 1p to 265p and Tomkins, responding to an analysts' visit, rose 8p to 288.5p.
Ropner, the engineering and shipping group, rose 12p to 142p on the long-awaited bid from Jacobs; British Building & Engineering gained 15p to 68.5p as Britannia, up 1p to 31p, increased its stake to 11.8 per cent and no doubt with bid hopes in mind said it wanted to start talking to BB&E.
Polymasc Pharmaceuticals edged forward 2p to 123.5p as the Royal Free Hospital School of Medicine sold 500,000 shares - 2.5 per cent. The company said the sale was the result of government funding cuts. The school still has 21.47 per cent.
RJB Mining gained 5p to 375p after buying in 5 per cent of its capital at 390p.
Meteor Technology held at 11p. It still seems to be having problems with its shareholders with Abercorn Investments and Tom Wilmot, who used to run the Harvard Securities financial group, thought to have sold their entire shareholdings. But, it appears, Abercorn and Mr Wilmot are still on the register. It has sent out 212 notices in connection with the two stakes and other unspecified shareholdings.
West 175, specialising in cookery shows, said profits would be below forecast; so the shares were left stewing 15p down at 95p.
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