Market Report: Appetite for acquisitions sends Compass higher
Wednesday 01 December 2010
It was a busy day for Compass yesterday on the acquisitions front, as the catering company confirmed one deal while rumours flew that it was on the trail of another.
The world's biggest contract caterer announced that it had purchased the cheerful-sounding Life's A Party, an Australian food services company, for just over £14m. Compass said the deal "provides an excellent opportunity for Compass Group Australia to expand its existing presence in [the education and leisure sectors]".
While investors digested the news, market gossips were discussing speculation from the other side of the Channel that Compass may make a bid for the French vouchers group Edenred. The company, which was demerged from Accor last June, specialises in prepaid services and has a presence in 40 countries.
Listed on the NYSE Euronext in Paris, its price shot up nearly 3.5 per cent to €17.14, while Compass was also on the move, climbing 6p to 555.5p. Traders pointed to the fact that when releasing its final results last week, the company said their ongoing strategy involved looking at other businesses, with one adding that Compass "has got a pretty good track record of getting value from acquisitions".
However, Evolution Securities' Nigel Parson said he would be "very surprised" if the speculation was accurate, and he believes Compass is more likely to focus on smaller deals in the catering sector. "Everything about contract catering is discipline and eating in-house, and everything about vouchers is freedom and eating where you want," he said.
Overall the FTSE 100 just failed to finish in positive territory, losing 22.68 points to 5,528.27. It completed a turbulent November for the top-tier index, during which time it retreated more than 160 points despite touching a high of 5,875.35.
Investors continued to worry about the eurozone while data from the US showed house prices in September had fallen again; however, manufacturing and confidence data from the States was more positive.
The markets' recent volatility was blamed for the postponement of an initial public offering of Vedanta Resources' copper business. The miner was expected to list Konkola Copper Mines at some point this month, but an IPO will now not take place until 2011. It is anticipated that it will raise $1.1bn, but following the announcement of the delay Vedanta was knocked back 24p to 1,986p.
Carnival was near the top of the blue-chip index, as it added 53p to 2,622p thanks to a thumbs-up from Numis. The broker called the world's largest cruise company "a high-quality business" and said that the industry outside North America is "young... with low market penetration and significant growth potential", as it raised its advice to "buy". At the bottom, Resolution was still suffering from being given an "underweight" recommendation by JP Morgan Cazenove as it dipped 8.3p to 211.3p. Meanwhile, with the threat of further strike action growing after cabin crew called for a new ballot earlier this week, British Airways shed 5.6p to 255.6p.
On the FTSE 250, Gartmore was among the losers of the session as one of its potential buyers ruled out any chance of it making a bid. The CEO of Aberdeen Asset Management said yesterday that it was "very, very unlikely" that it would attempt to purchase the hedge fund group, which has been for sale since it lost the high-profile Roger Guy at the beginning of last month.
Although he accepted that Aberdeen's statement was not good news for Gartmore, a trader did point out it was not among the major names that have been talked about as a potential buyer. Still, Gartmore was driven back 3.5p to 101.8p while Aberdeen - which released forecast-beating pretax profits - stayed steady on 179p.
Also struggling was the safety equipment company Halma, which shed 15.4p to 313.6p, despite revealing that its first-half pre-tax profits had gone up by 29 per cent. Elsewhere, reports that Taylor Wimpey is looking to sell its US unit Taylor Morrison did not prevent it falling 0.48p to 23.81p.
SThree was doing much better, as it was driven up 7p to 287p thanks to Panmure Gordon. The broker changed its advice on the recruitment company to "buy", and the broker's analysts said that "recent reassuring statements from Harvey Nash, Randstad and Hays should allay fears that the company remains on track".
Among the small-caps, the travel company Holidaybreak was boosted 20p to 290p as it said that its education unit would continue to grow after it announced that it was about to buy a 50 per cent stake in Meininger for €36.5m. The German group provides accommodation for school tours, a market which Holidaybreak sees as resilient.
Meanwhile Silverdell, which is listed on the Alternative Investment Market, revealed a huge 317 per cent jump in pre-tax profits, and the asbestos removal specialist company advanced 0.5p to 8p.
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