Market Report: Aegis falls as break-up potential takes a knock
Tuesday 19 July 2011
Investors hoping that the sale of its market-research arm will prompt a full break-up of Aegis received a blow yesterday, as the advertising group followed the wider market down.
The company – whose Carat business is the world's largest independent media buyer – revealed last month it was in exclusive discussions with Ipsos over potentially selling its Synovate unit. As a result, speculation has been widespread that if and when a deal is agreed, the remaining Aegis Media business could become a target.
However, Royal Bank of Scotland played down the talk, saying that although a disposal of Synovate was "increasingly likely" and that Aegis Media would be "vulnerable" as a result, it was "sceptical the whole business would be bid for".
"We believe Aegis Media... is a 'must-look-at' asset for many in the industry," it said, but added that it was not "a 'must-have' asset due to its lack of emerging-market exposure... and overexposure to Europe". Instead of a bid for the whole business, it suggested Aegis's peers may "be keen to cherry-pick certain assets to avoid anti-trust issues in certain geographies where there would be overlap".
Nonetheless, the broker's analysts raised the company's target price to 165p from 150p, predicting the disposal of Synovate will prompt a rally and that "management will swiftly move to reinvest proceeds". However, it was not enough to prevent Aegis – which revealed it had bought a minority stake in the mobile media group TigerSpike for $11m (£6.9m) – shifting down 3p to 151.7p on the mid-tier index.
"Everything's rubbish" was the succinct opinion of one trader, as the FTSE 100 dropped 90.85 points to 5,752.81, meaning it has now shed more than 300 points in seven days. With sovereign-debt fears still high, the focus – in the UK and across Europe – was on the latest bank stress tests following the announcement of the results last Friday after the bell.
Although all of the UK-listed banks examined passed, they were deep in the red as Royal Bank of Scotland retreated 2.12p to 32.97p while Barclays and Lloyds Banking Group both closed at their lowest level since 2009, dipping 15.65p to 207.65p and 3.34p to 41.34p respectively. Investec's Lee McDarby was among the worried voices, saying that although just eight of the 90 European banks tested failed, "if you dig a little deeper into the results then they do not paint a particular comfortable picture".
With investors running scared of risk, both gold and silver were increasing in value and the former touched yet another record high, making it above $1,600 per ounce for the first time in history. As a result, Fresnillo – up 34p to 1,659p – and Randgold Resources – up 95p to 5,560p – were sitting pretty while the rest of the mining sector was left weaker.
Also ahead was ARM Holdings, as the chip designer brought its losing streak to an end by jumping up 5p to 569p. The Cambridge-based group has been knocked back more than 10 per cent in the past four days, but market voices were optimistic ahead of today's third-quarter results from Apple, which uses ARM's technology.
reckitt benckiser was among the defensive stocks outperforming the benchmark index, as City scribblers said the recent vague bid speculation around the Air Wick owner has a slight whiff of truth around it. The consumer-goods giant crept back just 3p to 3,456p after Investec's Martin Deboo raised his recommendation to "hold" from "sell", saying that "even a remote possibility of a takeout provides support".
Examining the chatter around the group, Mr Deboo suggested that among the names linked to the company, "Colgate could contemplate only a nil-premium merger... [while] Procter & Gamble could take out Reckitt for cash but would also encounter regulatory problems". However, the analyst clarified that "while a bid approach can't be ruled out, we think it's unlikely".
On the FTSE 250, the news that Rank will remain a listed company meant the gaming group touched a high of 162.5p during early trading, before it finished 2.7p ahead at 153.7p. Guoco's 150p-a-share offer for the Mecca Bingo owner just failed to get the 75 per cent stake it required to take the company off the market, prompting Panmure Gordon to reintroduce its "buy" rating.
Taking the wooden spoon was Inchcape, down 33.3p to 373.8p, with Société Générale downgrading the car dealer's rating by two notches to "sell". "Don't mention the kangaroo in the room," the broker said, which highlighted sales data from Australia – as well as Singapore – as making it "increasingly nervous".
down on the Alternative Investment Market, the penny stock Coms saw its share price shoot up nearly 60 per cent after the telecommunications group revealed a new iPad app. The group advanced 1.12p to 3p off the back of the reaction to its software, which will enable owners of Apple's tablet to make and receive calls.
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