Market Report: Ashtead benefits from $2bn merger of US rivals

 

Instead of being scared off by its rivals across the Atlantic ganging up, a multibillion-dollar merger between two of its peers gave Ashtead a boost yesterday. The equipment hire firm climbed 10.2p to 209.6p on the mid-tier index after United Rentals agreed to pay $2bn for RSC Holdings, sparking hopes it could become a takeover target itself.

With United Rentals paying a premium of almost 60 per cent to RSC's share price, many in the City were scrambling for their calculators to reassess Ashtead's value. Numis Securities worked out that if the same asset valuation was applied, the US operations of Ashtead alone could be worth as much as 313p a share.

The tie-up was being seen as a vote of confidence for the US equipment rental market, which provides over 80 per cent of Ashtead's revenues. Numis reassured fears the move may end up harming the company, saying that it did not pose "a significant competitive threat ... and may actually offer an opportunity to gain a small amount of market share".

There was also speculation further consolidation in the sector may see the group attract an admirer itself, with Numis' Mike Murphy saying that at some point "you might think Ashtead could be on United Rental's list of companies it may try to buy".

Overall, it looked as if the FTSE 100 was going to finish the week on a high, but a late slump on – what else? – eurozone fears left it 13.51 points weaker at 5,387.34 by the bell. Despite rumours during the session that Standard & Poor's could be about to downgrade a number of European countries, Royal Bank of Scotland and Lloyds charged ahead 0.36p to 20p and 0.43p to 24.5p respectively. Barclays actually had its credit rating cut, by Fitch, but it also moved higher, shifting up 0.95p to 171.45p.

The miners were still on the rebound, cheered by whispers continuing to swirl that China may be preparing to cut its reserve ratio for banks once again. With encouraging economic data coming out of the US as well, bouncing metal prices saw Antofagasta tick up 42p to 1,172p while Kazakhmys put on 27p to 874p.

At the foot of the top-tier index, Essar Energy slumped to yet another record low, with the Indian giant's slide of 8.8p to 184.9p meaning it has shed over 25 per cent in less than a fortnight.

Investors in the blue-chip index were clearly not in a charitable mood. Drugs giant GlaxoSmithKline was 15p lower at 1,443p despite announcing it was increasing the number of pneumonia vaccine doses it is selling at a discount for use in developing countries.

Meanwhile, Burberry dipped 10p to 1,138p as the luxury brand's chief executive Angela Ahrendts gave more than £500,000 in shares to her charity the Ahrendts-Couch Family Foundation, which it then sold.

A week in which it released its third profits warning of the year got worse for Logica yesterday. The IT services firm dropped 2.25p to 59.7p on the FTSE 250 amid claims its specialist staff means it has less chance of becoming a bid target.

Takeover chatter has been circling the group recently thanks to its share price shedding nearly 60 per cent in under 10 months, yet Panmure Gordon's George O'Connor queried why a bidder would be interested in its "expensive experts" when recent deals in the sector show "they want generic skills".

While his football club Newcastle United may have slipped down the Premier League recently, Mike Ashley's Sports Direct was top of the mid-tier index last night. The retailer was pushed up 20p to 210p on relief that it has decided not to make a bid for Blacks Leisure, with the news leaving the struggling tents seller 0.25p worse off at 2p.

Hovis-owner Premier Foods ticked up 0.23p to 5.95p in the wake of its announcement late on Thursday that it had agreed a €41.4m disposal of a number of its brands.

It was a case of too little, too late, however, with it being one of the companies – which also includes Thomas Cook (down 0.26p to 15.49p) and Mothercare (down 4.4p to 158.4p) – who are starting life as a small-cap stock on Mondayafter being relegated in the latestindices reshuffle.

A U-turn from Global Brands meant that the Domino's Pizza-franchisee's share price rose by two-thirds on AIM. The group, which runs the takeaway business in Switzerland, Luxembourg and Liechtenstein, had wanted to delist, but has now changed its mind.

While its pizza operations will be demerged as an private company, it plans to stay listed as an investment vehicle – news which prompted the tiddler to jump 0.38p to 0.6p.

Yell Group was fired up 9.18 per cent to 5.71p on the small-cap index amid vague optimism surrounding the struggling Yellow Pages-publisher's attempts to restructure its debt.

FTSE 100 Risers

Old Mutual 126p (up 2.3p, 1.86 per cent)

After climbing over 11 per cent on Thursday as it revealed it has agreed to sell its Nordic operations for $3.2bn, insurance group continues to rise.

Whitbread 1,538p (up 10p, 0.65 per cent)

Costa Coffee and Premier Inn-owner still advancing despite Fitch Ratings announcing that it expects the European hotels market to weaken next year.

FTSE 100 Fallers

Man Group 127.6p (down 5.9p, 4.42 per cent)

World's largest listed hedge fund finishes close to the foot of the blue-chip index after Deutsche Bank downgrades its recommendation to "sell".

Imperial Tobacco 2,325p (down 72p, 3 per cent)

With its share price having added close to 8 per cent over the past three weeks, owner of Lambert & Butler and Davidoff suffers a heavy loss.

FTSE 250 Risers

Carpetright 516.5p (up 39p, 8.17 per cent)

Floor coverings retailer still getting a boost from its interim results earlier in the week, as it rises for the fourth straight day, during which time it has added more than 30 per cent.

Imagination Technologies 543p (up 18.5p, 3.53 per cent)

Chip designer given a push by Barclays initiating coverage with an "overweight" rating while Canaccord upgrades to "hold" from "sell".

FTSE 250 Fallers

Shanks 95.1p (down 6.4p, 6.31 per cent)

Waste management company is knocked back by Goldman Sachs' decision to take it off the broker's "buy list" and reduce its target price to 138p.

Drax 527p (down 18.5p, 3.39 per cent)

Power station operator sees its share price fall back to a six-week low after the analysts at Credit Suisse raise their price target from 350p to 440p.

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