Burberry in fashion after €3.7bn Bulgari deal
Tuesday 08 March 2011
Burberry was in vogue last night, matching its highest price on record, as the luxury goods sector was boosted by news of a €3.7bn (£3.2bn) takeover and claims it could become a "trillion-dollar industry" in less than 15 years.
The upmarket retailer shot up 42p to 1,200p after its French peer LVMH announced it was acquiring the Italian jewellery group Bulgari in an all-share deal which values it at about 60 per cent above its average share price for the past month.
Market voices said the move raises the possibility of further consolidation among the luxury companies, with one trader saying the takeover "puts the spotlight back on to Burberry" – itself frequently the subject of bid speculation over the past few years.
However, analysts from Citigroup were not completely convinced, saying that despite the fact it may "signal renewed merger-and-acquisition activity in the sector", they "believe that there is one less natural buyer now".
Burberry was also helped forwards by Goldman Sachs, which repeated its "buy" rating on the group and raised its target price by 66.2p to 1,452p.
In a comprehensive note, the broker's analysts said the "sector is a levered play on global economic realignment" and predicted there would be "600 million more luxury goods consumers by 2025 [which] should see [it] grow... into a trillion-dollar industry".
Adding that they expected "China to remain the engine of luxury goods growth", the analysts compared the industry in the country to "Japan's in 1997, from which point it grew 180 per cent to its peak".
The FTSE 100 seemed certain to finish in positive territory, but a retreat in the final few hours of trading meant it was 16.61 points lower by the bell at 5,973.78. Noting that the blue-chip index "seems to be becoming more and more irrational and unpredictable", Capital Spreads' Angus Campbell said it is "hard to push on to new ground and maintain gains when the price of oil remains supported by the unrest in the oil-producing nations".
The biggest move came at the bottom, where Inmarsat was floundering after plummeting 91.5p to 593p – a fall of more than 13 per cent. The mobile satellite group announced its final results, with its figures for the final three months disappointing.
Despite saying the company "has a very bright future", Prime Market's Richard Curr said the update "opens up a short selling opportunity", adding that "the comparative volatility of the shares marks Inmarsat out as an ideal day and short-term trading instrument".
Intertek took pole position, gaining 95p to 1,994p, after the testing group's final results, in which it managed to beat predictions with its annual profits rising 11 per cent. There was praise as well for the company's announcement of a £450m deal to buy the services company Moody International, and Seymour Pierce's Kevin Lapwood described it as "an important strategic move" which "considerably enhances [its] global position in technical safety services and systems certification".
rumours have been sweeping the market for the past few weeks that Forth Ports was being lined up for a takeover bid, and yesterday they were shown to be true as the UK's only listed ports group revealed it had received a £745m approach. The offer, worth 1,630p a share, came from the group's shareholder Arcus European Infrastructure Fund, part of the consortium that made a failed bid last year, and its new attempt lifted Forth 82p to 1,605p.
Also doing well was Hansen Transmissions, with the gearbox manufacturer 1.3p ahead at 41.3p as HSBC reiterated its "overweight" advice and kept a bullish price target of 85p. Describing the group as "a volume-recovery and margin-expansion story", the broker's analysts said it was "the best way to play the India and China theme of any Western renewable company".
Michael Page was among the day's losers on the second line, slipping back 11p to 524.5p, despite the recruitment group seeing its operating profit increase by more than threefold last year. However, the improvement was largely expected given how tough 2009 was, and the group did sound cautious over its outlook in the UK.
Back on the top-tier index, and Petrofac crept up 9p to 1,475p in the wake of its final results. The oil services group's net profit beat market expectations while its update prompted analysts from Evolution Securities to increase its advice to "add", pointing out that it "looks much better value than at the start of the year".
After bid rumours sent it soaring, Kalahari Minerals confirmed it was engaged in discussions over a potential offer, and it finished 24.75p stronger at 285p on the Alternative Investment Market. The uranium miner refused to announce whom it was actually talking to, but did say it was still involved in a separate dialogue over potentially combining the Husab deposit in Namibia (owned by Extract Resources, of which it holds more than 40 per cent) and Rio Tinto's Rössing mine, with the two projects in close proximity.
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