Market Report: Approach doubts hit Chemring price
Tuesday 21 August 2012
Traders were in a defensive mood yesterday as volumes hovered around annual August lows and defence stocks found themselves in focus. Chemring, the military equipment maker, was the FTSE 250's biggest faller, down 40.8p to 373.9p, as doubt emerged about Carlyle's approach coming to fruition. The US private-equity firm admitted its interest in Chemring last Friday but scribes at UBS reiterated that it is still "highly preliminary".
Oriel Securities upgraded Chemring from reduce to add, raising its target price from 375p to 450p and said trade buyers may yet come out of the woodwork. Carlyle now has until 14 September to either make an offer or walk away.
Amid another eerily quiet August day, traders at least had a new bid story to spin with speculation emerging around Senior, the mid-cap engineer that specialises in the aerospace sector.
A 4.7p rise in Senior's share price to 212.4p was accompanied by vague rumours that a possible bidder could be sniffing around – with the whispers suggesting Boeing and Rolls-Royce as potential suitors. Experts admit the aerospace sector is certainly of interest at the moment. But City voices urged caution – if there really was a bidder behind the scenes the price would have been pushed up far higher.
The top riser in the FTSE 250 was Argos-to-Homebase owner Home Retail Group. Analysts at Deutsche upgraded the retailer from sell to hold due to the "downside risks" reducing and the "stabilisation of profits" at Argos.
The FTSE 100 was down 28 points to 5824.37 with miners the biggest fallers.
Analysts warn mining stocks will continue their underperformance for the rest of the year.
Chris Beauchamp, an analyst at IG Index, said: "The heavyweight element of the UK mining sector has made the FTSE 100 index underperform this year. With the outlook for miners still being bleak … this will mean that the British benchmark index lags behind other indices."
The long-running saga of the world's largest merger took another twist when Qatar Holding continued to snap up shares in Xstrata.
It left the $30bn (£19bn) bid by Glencore for the mining giant looking more unlikely to happen.
Xstrata fell 31.8p to 907.5p while Glencore, which already owns 34 per cent of Xstrata, was up 1.6p to 353.8p.
The Qatari state investment fund has been buying more shares over the past two weeks, with the latest disclosure taking its stake to more than 11.7 per cent. Glencore's bid values each Xstrata share at 2.8 Glencore shares, but the Qataris are demanding 3.25. Both share prices have taken a battering, falling around 29 per cent since highs in February – meaning the share ratio has remained the same.
Glencore's chief executive Ivan Glasenberg has remained resolute on the bid price, arguing falling commodity prices have taken their toll.
Glencore updates the market with first-half results today.
Qatar joins shareholders, including Standard Life and Legal & General, who are against the mega-merger. The deal needs 75 per cent approval at the vote on 7 September.
In France, the shock news of the weekend was the sudden death on Friday of Pernod Ricard chairman Patrick Ricard.
Mr Ricard, 67, stepped down from his chief executive position at the drinks business in 2008. The son of the company's founder, Mr Ricard was credited with taking the firm global so it is now only second to Diageo.
Shares in Diageo rose 0.5p to 1,687p today with thirsty City traders expecting it to confirm its purchase of the Jose Cuervo tequila business in a $3bn (£1.9bn) cash and shares deal at its results on Thursday, or at least within the next month.
Turning to the small-cap index, speculative bid chatter for online betting group Sportingbet continued from last week. Shares rose 3.25p to 40.75p. The betting group had been approached by Ladbrokes in 2011 but the negotiations came to nothing last autumn.
Over on Plus, Arsenal Football Club confirmed the sale of Cameroon midfielder Alex Song for £15m to Barcelona – the latest player out the door – but the tightly traded share price only fell 0.5 per cent.
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