Market Report: F&C knocked by rebel shareholder concerns
Tuesday 11 January 2011
The ongoing uncertainty around F&C Asset Management hit its share price yesterday, as the group slid towards the bottom of the mid-tier index after investors were advised to sell ahead of a key meeting next month.
The fund management company is currently embroiled in a tussle with the activist shareholder Sherborne, which is set to culminate in an extraordinary general meeting early in February on the future of F&C's chairman, Nick MacAndrew. Investors will vote on Sherborne's proposals to replace Mr MacAndrew with its own founder, Edward Bramson, as well a number of other key changes to the board.
F&C's share price has soared recently, rising from a low of 47.5p in July to last week reaching 92.6p. Its gain has been helped by Sherborne, building a 17 per cent stake in the company since August, prompting speculation that it was considering making a bid for the group, which it denied.
Yesterday, however, F&C was driven back 4.05p to 88.85p as Credit Suisse said it was "inclined to take profits given the uncertainty that looms over [it]."
"In our view, if the resolutions are voted against by F&C shareholders, the possibility of a full bid by Sherborne will be unlikely, reducing the bid speculation inherent in the shares," said the broker, which noted that even if Sherborne was successful, it has not yet revealed its plans for the future.
"In any case, in the short term this may create further uncertainty with distributors and fund investors, which is destabilising and increases the risk of fund outflows," it added, leaving F&C with a target price of 65p.
Overall, the FTSE 100 fell 28.03 points to 5,956.3 as the blue-chip index was knocked by many of the miners following disappointing import figures from China and the continued impact of the Australian floods on operators in the country.
Investors were also affected by worries that Portugal may soon have to ask for a bailout. Although it has claimed it does not need the assistance that Ireland and Greece received, City Index's Giles Watts pointed out that "both countries voiced the same defence repeatedly before being forced to accept help from the EU emergency fund".
Risers on the top-tier index may have been in short supply, but Smith & Nephew still managed to add 62p to finish on 712p. The replacement knee and hip manufacturer has frequently been the subject of rumours that it could be a takeover target, and over the weekend reports emerged that the US group Johnson & Johnson had a bid rejected in December.
The reported offer, which neither company has confirmed or denied, was supposed to be worth 750p-a-share, a price which Matrix's Navid Malik described as "highly opportunistic". Analysing recent merger and acquisition activity in the sector, Mr Malik said he believes its "fair value... is more like 1,057p".
Wm Morrison's Christmas trading update kicked off a key week for the supermarkets, with J Sainsbury and Tesco also due to release figures. The group edged up 1p to 271p after expressing caution on the outlook for 2011, noting the continuing increase in food prices.
It also took the opportunity to dismiss well-worn speculation that it may make a bid for Ocado, which released an update of its own. The online grocer revealed that over the Christmas period its sales had seen an uptick of over 25 per cent, yet it still shed 5p to 181p.
It was certainly not helped by Altium Securities, which pointed out that the group "has no earnings, or cash generation" and said it believes it "will struggle to generate a profit over the next few years".
the latest property price data from Halifax was being digested by investors, and it did not signal good news for the housebuilders on the FTSE 250. According to the lender, December saw a month-on-month fall of 1.3 per cent, resulting in a total decline of 1.6 per cent over 2010.
Howard Archer, IHS Global Insight's chief economist, said the figures support his view that "house prices will trend down gradually overall to lose around 10 per cent from their peak 2010 levels by the end of 2011". Taylor Wimpey dropped 1.17p to 32.87p, while Barrat Developments and Bellway retreated 0.95p to 92.45p and 25p to 655.5p respectively.
Persimmon was not doing as badly, easing back 0.2p to 437.5p. The group said yesterday its full-year pre-tax profits should be near the top of forecasts, and it received another boost from Galvan Research's Ed Woolfitt who said it was "better placed than ever as a solid housebuilding recovery player".
among the small-cap companies, ProStrakan closed 11.75p better on 115.25p after it gained approval in the US for Abstral, its cancer pain drug.
Meanwhile, on the Alternative Investment Market, Vatukoula Gold Mines' update – in which it warned production of the yellow metal would drop in the second-quarter – resulted in it declining 41p to 171.5p.
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