Market Report: Carphone in line for a Best Buy deal lift
With US retail giant Best Buy being targeted by its founder, the talk in the Square Mile yesterday was focused on what could lie ahead for its British partner Carphone Warehouse if a deal goes ahead.
Earlier this week, billionaire Richard Schulze made an offer worth up to $8.84bn for Best Buy which if successful, claimed Exane BNP Paribas, could prompt a reshuffle of its joint ventures with Carphone.
The pair share ownership of retailer CPW Europe – which in the UK operates under the Carphone Warehouse brand – as well as the emerging markets-focused business Global Connect.
With the agreement between the companies containing a number of options regarding them being able to buy each other's stakes at certain points in the future, analysts from the broker said that if Best Buy is snapped up, they believe Carphone will have the ability to take hold of the European business while selling its stake in Global Connect.
Saying this is something the company would be "highly likely" to do, they added that benefits would include it having greater freedom in signing agreements with global retailers. "This could drive significant further upside to our Carphone valuation," the scribblers claimed as they reiterated their "outperform" advice on the stock, which advanced 3p to 141p.
Having closed on Monday at a three-month high, for much of the session it looked as if the FTSE 100 was happy to consolidate its gains before a late rally saw it push up another 32.47 points to 5,841.24.
While hotel giant InterContinental shot up 103p to 1,725p after announcing it was returning $1bn to shareholders, Evraz closed at the top of the podium. The Roman Abramovich-backed steelmaker jumped 25.9p to 276.9p following quarterly figures from its Austrian peer Voestalpine beating expectations.
Standard Chartered was at the bottom of the Footsie as, despite denying allegations from US regulators it had laundered $250 billion from Iran, the Asia-focused bank slumped 241.5p to 1,228.5p. It was a different story for the rest of the banks, however – Barclays and Lloyds climbed 2.65p to 179.85p and 0.32p to 31.68p while Royal Bank of Scotland edged back a mere 1.3p to 227.5p.
Across the Atlantic, Interpublic was still attracting attention in the wake of France's Publicis earlier in the week denying it had been in takeover talks with the US advertising group following recent bid speculation. Traders highlighted s comments from media giant WPP (4.5p better off at 850.5p) boss Sir Martin Sorrell, who reportedly said he would "challenge [the denial's] veracity". Another idea being floated by market gossips was the possibility of WPP itself having a potential interest in Interpublic, although City voices played down the vague speculation because of the size of such a deal.
Having been helped this week by reports claiming banks have been looking at Marks & Spencer as a possible bid target, analysts were rather dismissive of the idea. With Bernstein Research's Jamie Merriman claiming a private equity firm would have to fork out up to £10 billion for the high street institution, he pointed out this would be the biggest ever acquisition of a UK retailer and argued it "would be difficult to finance [a leveraged buyout] of this size in the current environment". Meanwhile, JP Morgan Cazenove's analysts warned M&S's pension deficit was a possible poison pill, although by the bell it had edged up 1.7p to 349.4p.
Heritage Oil was back in action on the FTSE 250. Trading in the explorer had been suspended for more than a month after the explorer revealed in July plans to buy oil field assets in Nigeria, and yesterday – following the announcement of a $370 million rights issue earlier in the week – it celebrated the restart by spurting up 25.8 to 148.8p.
Among the tiddlers, Sareum drove up 0.95p to 1.58p on Aim after the drugs group announced it was in advanced talks with an unnamed party "which may or may not lead to a licencing agreement regarding one of the company's research programmes."
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