Market Report: Hays in the sights of Dutch recruiter Randstad
Tuesday 12 August 2008
Bid speculation was evident around Hays, the FTSE 250-listed staffing group, which gained 6.59 per cent or 6p to 97p yesterday.
Market sources suggested that Randstad, the Amsterdam-listed staffing group, was eyeing the company and may make a formal approach in the near future.
The talk follows Adecco's approach to Michael Page, Hays's FTSE-250 listed rival. The news, confirmed by Michael Page in a statement to the market last week, has energised the sector as investors peg their hopes on a wave of consolidation activity.
Analysts, while acknowledging the possibility of a deal given the de-rating of Hays's stock over the past year, questioned Randstad's ability to finance the deal following the recent acquisition of Vedior, a Dutch rival. Unlike Adecco, Randstad has just completed a major acquisition, they said, and like Michael Page, Hays is expected to drive a hard bargain. Randstad will have to offer a significant premium to the current share price, they added, which, given the state of the markets, will present a funding challenge.
Randstad declined to comment on the rumours. In the wider sector, Michael Page was up 2.25p at 358p and Robert Walters gained 5.37 per cent or 6.5p to 127.5p.
Elsewhere, ITV gained 2.8p to 47.6p and closed as the second-highest gainer on the FTSE 100 following renewed speculation of a bid for it by Endemol, the Netherlands-based media group which is owned by consortium of Goldman Sachs Capital Partners, Mediaset and the Cyrte Group. Analysts remained wary of the bid talk, pointing to the uncertainty around BSkyB's stake in the broadcaster. "Following a weak set of [second-quarter results] we believe bid support may drop away should the sale of BSkyB's stake be deemed unnecessary by the CAT [Competition Appeals Tribunal], or delayed," said UBS.
Overall, the FTSE 100 was up 52.6 points at 5,541.8 and the FTSE 250 gained 182.2 points to 9,384.1. The senior index was helped by the retail sector, which supplement Friday's gains. Marks & Spencer, at third place on the FTSE 100, was up 17p at 304p and the Carphone Warehouse climbed to 217p, up 11p. The banking sector also rose following reports that private equity groups were buying as much as $8bn (£4bn) in discounted loans from the Royal Bank of Scotland, which gained 8.5p to 249p. HBOS was up 4.25p at 335.75p, Lloyds TSB advanced to 330.75p, up 12.75p, and Barclays gained 13p to 379.5p.
Among the miners, the Eurasian Natural Resources Corporation eased to 1,060p, down 64p, after Kazakhmys, down 14p at 1,234p, increased its stake in the company to just above 25 per cent, but said it had no current plans to bid for the rival group.
Cobham, the aerospace and defence specialist, was down 0.25p at 225.25p after Cazenove initiated coverage on the stock with an "underperform" rating. "We see the risk profile of the group as rising as the business continues to evolve through acquisition and move away from historic areas of strength," said the broker, adding: "Recent deals consolidate Cobham's status as a Tier two player, but in our view undermine its attractions as a take out candidate."
On the FTSE 250, Barratt Developments climbed to 158.25p, up 23.63 per cent or 30.25p. The troubled house builder raced ahead after news that Polaris Capital Management, the Boston-based fund manager, had increased its stake in the company to more than 6 per cent.
In the wider sector, a new report from Goldman Sachs, while acknowledging the risks related to the leading stocks, highlighted the prospect for gains. "The potential reward for owning these stocks is a possible re-rating to a price/tangible book ratio of 1, after taking into account possible write-downs," it said.
Traders said the news in Barratt and the Goldman note had sparked buying and, in turn, a short squeeze across the sector. As a result, Bellway, which was upgraded to "neutral" from "sell" by Goldman, gained 7.37 per cent, or 44.5p, to 648p. Taylor Wimpey was up 14.15 per cent, or 7.25p, at 58.5p and Persimmon climbed to 410.5p, up 11.02 per cent or 40.75p.
Also on the upside, the retailer Game, up 3.75p at 277.75p, WH Smith, up 7.75p at 405.25p, and Kesa Electricals, up 8p at 175.75p, were firm after Pali International cast the trio as possible bid targets. "Debenhams [flat at 53p], Woolworths [up 0.46p at 7.36p] and M&S were all the rage last week, in terms of bid rumours, but none of these look particularly attractive to us," said Pali analyst Nick Bubb. "If overseas buyers come looking for cheap UK assets, despite the grim outlook for consumer spending, then our three favourites would be Game, WH Smith and Kesa."
On the downside, Hikma Pharmaceuticals lost 4p to 396p after Credit Suisse reduced its target price for the stock to 405p from 500p while maintaining a "neutral" rating.
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