Market Report: Diageo 'has a taste for Indian spirits'
Traders weren't quite ready to raise a late pint at the end of the week to reports that Diageo, the world's biggest spirits producer, is in talks to take a stake in United Spirits, the number two player in the Indian market. Colourful billionaire Vijay Mallya is in need of cash to keep his Kingfisher airline up in the skies. It is loss-making and needs some dosh – up to $600m (£370m), the chatter goes.
Mallya owns 28 per cent of United, which is valued at £1.5bn. The word is he won't sell the entire stake but Diageo will strike a deal which gives it boardroom control of the company which that McDowell's whisky. Slurp.
Diageo's own distribution business in India showed a healthy 24 per cent rise in sales in the year to June. Whether its own locally distilled Rowson's Reserve is a better tipple than United's McDowell's, our man in the The Raglan was unable to say. Diageo shares shrugged at the idea, gaining just 2.5p to 1722.5p.
The departure of company secretaries normally doesn't make the headlines. But Doug Evans' departure from Mitchells & Butlers shifted the share price down 3.7p at 283.2p. Bob Ivell, who has been executive chairman for a few months, has clearly done more than just appoint Alistair Darby from Marston's as the next chief executive. He's taken a broom to the boardroom. Does that mean Joe Lewis is less likely to bid?
The Apple shop doesn't have tills, but if it did, they would have been ringing louder than St Paul's yesterday – you couldn't walk far in central London without coming across queues of numpties outside the tech giant's shops. Each was desperate for the dash of cool they fervently hoped a new iPhone 5 would give them – and that reception was felt in the benchmark index.
A note from JPMorgan analyst Mark Moskowitz said the latest Apple handset's improvements are good enough to restore the firm's smartphone market leadership, and that will give suppliers derivative benefits. In response, Imagination Technologies, which designs graphics chips for Apple, put on 20p to 531p. Chip-maker ARM Holdings had already gained in the run-up to the new phone's appearance, and fell 0.5p to 578.5p.
If anyone was still under the illusion that bankers were clever chaps who spent years studying illustrious economic tomes and working out trading algorhythms, the title of a note put out yesterday by Espirito Santo suggests otherwise. Grand Theft Aero is the heading of their analysis of the proposed BAE-EADS tie-up – suggesting a mis-spent youth doing battle with PlayStation's blockbuster Grand Theft Auto game. But they reckon they learnt from the experience. Their 7,000-word digest on the proposed €38bn (£30bn) tie-up begins: "We argue that the merger proposal outlined by BAE would represent a "steal" for EADS, hence our report title... We believe the deal is unlikely to proceed."
As Europe's biggest civil aerospace and weapons makers respectively, EADS and BAE want to get hitched to take on the might of US giant Boeing. But Espirito is adamant that political obstruction from the Pentagon will force the deal to fall apart. As BAE's dominant customer, the US has "an effective veto", say analysts.
Still, they reckon almost every possible outcome of the deal will be good news for shareholders, outlining the potential for a sweetened deal ("Upside!"), the emergence of an alternative bidder ("Upside!"), the deal going ahead ("a potentially cheap entry point for shares in the new company"), or being cancelled. "Short-term downside," they concede on this issue, but "it has historically been very profitable to buy defence stocks one or two years into a long and protracted budget downturn". BAE was given a big fat buy verdict – but the shares inched up just 0.6p to 341.1p.
The FTSE 100 index trod water, although for a time it was buoyant above the 5,900 level, before closing up just 2.02 points at 5,852.62.
On the bloody side of the index, National Grid took the wooden spoon, down 7.5p to 686.5p, after JPMorgan cut its rating on the stock from neutral to underweight.
Another stock under pressure was Tanfield, which makes powered lifts. It owns nearly a quarter of electric truck-maker Smith Electric Vehicles, which had been planning an IPO. But the US listing was pulled, and Tanfield was hurt in response. Its shares slumped more than 44 per cent or 22.5p to 28.75p.
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