Market Report: 'Glenstrata' deal has some worried about missing out
The heavyweight miners may have been largely buoyed by the possibility of a wave of consolidation across the sector yesterday, but not everyone was cheered by the prospect. After years of speculation, the news that "Glenstrata" looks set to become a reality sparked fears over who will be left out in the cold by the deal.
While Xstrata shot up by a huge 9.92 per cent to 1,230.5p after revealing it is in merger talks with commodities trading giant Glencore, which itself climbed 29.95p to 461.7p, Eurasian Natural Resources (ENRC) was knocked back 12.5p to 705p by dejected punters who had hoped that it would have been the one in line for a takeover bid.
Persistent speculation recently has suggested that Glencore could be interested in a move for ENRC, either through a takeover or acquiring the 26 per cent stake held by Kazakhmys (steady at 1,191p). Yet this now appears to be dead and buried, with Société Générale's Abhi Shukla saying that not only would Glencore be unlikely to want to do another major deal but that with Xstrata and ENRC being the top chrome producers in the world, regulatory issues will have increased.
Another group whose takeover potential took a blow was Lonmin, whom Xstrata abandoned an approach for back in 2008 and still holds a 26 per cent stake. A number of City voices played down the chances of it now becoming a target, including Guardian Stockbrokers' Atif Latif who said that "a block sale of the stake or a reduction in market value... seems the plausible outcome".
There was also speculation a disposal could be used by Glencore to help finance the merger, but Lonmin nonetheless advanced 22p to 1,082p as some clinged on to hopes it may still be taken out.
One company whose takeover potential actually seemed to be helped by the prospect of the merger was Anglo American, which was also the subject of a bid from Xstrata in the past.
With one idea doing the rounds that a combination of the two would be big enough to make a knock-out offer for Anglo, it charged up 97.5p to 2,830.5p, although Charles Stanley's Tom Gidley-Kitchin said that while an approach was now more likely, "that would be in several years' time".
A flat day saw the FTSE 100 narrowly miss out on closing above 5,800 points for the first time since last July, although its tiny climb of 5.35 points to 5,796.07did see it set a new six-month high. Yet largely the mood was cautious ahead of the release today of the closely watched non-farm payroll numbers in the United States.
Disappointing results from Marmite-owner Unilever (91p lower at 1,994p) and oil giant Royal Dutch Shell (28.5p lower at 2,297.5p) helped weigh the Footsie down, while the latter's figures also left rival BP 28.5p worse off at 2,297.5p ahead of its fourth-quarter results next week.
In early trading, revived takeover hopes saw Imperial Tobacco puff up as high as 2,337p after Nomura upgraded its rating on the cigarette manufacturer.
The broker's analysts speculated that a recent ruling forcing the Japanese government to sell its stake in Japan Tobacco (JT) meant JT could be "potentially more confident" about teaming up with British American Tobacco (down 8.5p to 2,988p) and making a move for Imperial sooner rather than later. However, by the bell Imperial was just 5p ahead at 2,308p.
Having closed at its highest share price this millennium on Wednesday, WH Smith slipped back 22p to 537p on the FTSE 250 after it announced boss Kate Swann had cashed in over £2m of her shares. The chief executive sold 425,000 of her shares at 550.74p, with some in the City arguing that previous share sales had proved rather adept.
Ocado continued its fantastic start to 2012 by powering up another 7.89 per cent to 79.95p. The online grocer has now gained nearly 25 per cent this year alone, to the dismay of the numerous short-sellers of the stock.
Meanwhile, waste group Shanks was the top riser on the mid-tier index, soaring 13.17 per cent higher to 113p after the revival of vague speculation it could be the target for a private equity approach.
A dispute over a $176m (£111.3m) contract it has won from the US Department of Defense left Avon Rubber 13p weaker at 307p. The losing bidder is launching a legal campaign against the decision, and the small-cap engineer – which makes gas masks as well as products for use in dairy farming – admitted the delivery of the order was going to delayed as a result.
Positive noises emerging from an investors presentation in New York helped Gulf Keystone Petroleum, with the Kurdistan-focused oil explorer – and favourite of the retail punters – spurting up 14p to 293p on the AIM.
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