Market Report: ENRC shares rise after talk of private buyout
Wednesday 27 July 2011
Talk that Eurasian Natural Resources (ENRC) could soon be saying farewell to life as a listed company meant investors were piling into the miner yesterday, leaving it as one of the blue-chip index's top performers.
According to the chitter-chatter, which pushed it up 10.5p to 791.5p, the group's major shareholders may team up with the Kazakh government – also the owner of a large stake – and attempt to take it private, although market voices were not convinced by the tale. With speculation a potential bid may be worth at least 1,200p a share, the suggestion was that such a move could come as a reaction to its depressed share price.
The miner trades at a sizeable discount to its peers partly as a result of concerns over its corporate governance, and a governance review – expected to last three months – was launched in June. Its mining rival Kazakhmys (which dipped 2p to 1,347p) owns 26 per cent of the group while over 40 per cent is in the hands of three Kazakh oligarchs, with a free float of under 20 per cent.
It is not the first time the miner has been the subject of speculation, after talk emerged earlier in the year that the commodity trader Glencore – down 4.35p to 480p – was mulling over an approach, although this was subsequently denied.
Despite traders still nervously watching the latest US debt-crisis developments and UK GDP figures providing little positive news, the FTSE 100 finished a volatile day narrowly ahead, edging up 4.47 points to 5,929.73. There were a number of major companies announcing results, including BG, which advanced 61.5p to 1,486.5p after revealing its second quarter profits had risen over 25 per cent.
BP's figures for the same period, however, missed forecasts and the energy giant dipped by 12.15p to 463.25p, with ETX Capital's Manoj Ladwa saying that the group's chief executive Bob Dudley was "going to be under increased pressure to deliver results quickly or break up the business".
For once, Burberry was looking rather shabby, dropping 51p to 1,549p as Royal Bank of Scotland downgraded its rating to "hold" from "buy". The broker was at pains to say it did not believe the luxury brand was going out of fashion, but cited the sharp rise of its share price in recent months as being behind the decision.
In the wider market, takeover talk was back on the table for the water companies, as Pennon rose 14p to 725p on hopes it could be the next target in the wake of Northumbrian Water – up 1.7p to 457.8p – opening its books to Cheung Kong Infrastructure Holdings earlier in the month.
The bid talk came from JP Morgan Cazenove, which said Pennon was "an attractive takeover candidate" and raised its advice to "overweight". The broker also praised its waste business Viridor, saying it is set to benefit from government policies to limit carbon generation and reduce the amount of waste sent to landfill.
Meanwhile, on the top-tier index National Grid rose by 1.5p to 610p on vague talk its Stateside operations could be in line for an approach. The rumours were linking the US companies Duke Energy and American Electric Power with a potential move, as market gossips suggested some of the proceeds may be returned to shareholders.
Reheated takeover rumours around Smith & Nephew failed to keep the prosthetics manufacturer in the blue, and it ended up creeping back 2.5p to 654.5p despite vague talk that it could receive an approach worth at least 850p a pop.
Weir Group, meanwhile, edged forwards 8p to 2,218p, a new all-time high, thanks to Goldman Sachs choosing the company as one of its favoured stocks in the capital-goods sector. Part of the reason for its positivity, said the broker's analysts, was the fact that it "stands out as a particularly attractive [takeover] candidate", and they claimed its "growth prospects in unconventional hydrocarbons worldwide could be appealing to a large industrial conglomerate".
Back on the FTSE 250, Aegis continued to rise – climbing 3.5p to 163.5p – after bid speculation made a return earlier in the week alongside chatter that the advertising group is nearing a disposal of its Synovate market research unit.
Dixons Retail was pegged back 0.43p to 14.77p on the read-across from Germany, where the retailer Metro AG announced its electronic goods division MediaMarkt-Saturn had made an operating loss of €44m in the second quarter.
Down on the Alternative Investment Market, ATH Resources was lifted 7p to 56.5p after the miner revealed it was in early talks over a potential bid being made for the group.
The Dragons' Den star Peter Jones will have been smiling after eXpansys, the electronics retailer in which he owns a 43 per cent stake, rose by 0.3p to 1.42p as its full-year revenues rose by 60 per cent.
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