Market Report: Investors check out bid talk on Burberry
Thursday 09 December 2010
The Blue chip index was awash with gossip yesterday, as a number of companies found themselves near the top of the leaderboard off the back of bid speculation.
Burberry reached a new record price of 1,156p after rising 26p as, not for the first time, rumours swirled that it could be the subject of a takeover approach.
Over the years several potential bidders have been linked with the upmarket clothing retailer, and this time the US handbag-maker Coach was the name in the frame once more, with a price discussed of 1,500p-a-share. However, it was not alone as traders also noted vague talk about a private equity group and an unnamed Asian company taking a look.
G4S's rise of 11.3p to 249.4p was also put down to reheated market chatter doing the rounds, with the security services company once again linked to a potential 350p-a-pop offer from Kohlberg Kravis Roberts. However, voices on the trading floor pointed to the clearing of a large seller as more than enough to provoke the surge.
There was also speculation surrounding Smith & Nephew, which pushed it to pole position. However, again the talk of a US private equity group being interested was not exactly fresh, although – with a price discussed of around 800p-a-share – the replacement knee and hip manufacturer was bumped up 55p to 662p.
The news that the US group Fortune Brands is to break up its divisions led to the idea being floated that Diageo could take the spirits unit, which includes Jim Beam bourbon and Courvoisier cognac. Diageo, whose comprehensive roster of alcoholic drinks includes Smirnoff vodka and Guinness, enjoyed a good day, gaining 13p to 1,158p.
There was one recently discussed deal which seemed further away than ever, as Simon Property threatened to pull out of its stake in Capital Shopping Centres if the company's purchase of Manchester's Trafford Centre goes ahead.
The US group had previously talked about potentially bidding for CSC, but its chief executive David Simon said it cannot make an offer unless it is allowed to conduct due diligence. CSC's response was to refuse to release the information, and the property company dipped 21.8p to 386.2p.
Overall, the FTSE 100 fell 13.92 points to finish on 5,794.53. The first few hours were marked by profit-taking, and although it rallied around the middle of the day, a higher dollar knocked mining and energy stocks, causing the index to slide.
The results of the latest quarterly review were released after the bell, with Cobham the only company to drop out of the FTSE 100 as part of the reshuffle. It will be replaced by IMI when the changes come into effect from the close of the session on 17 December.
There were a number of companies that will be relegated from the FTSE 250, which will have to say farewell to Robert Wiseman Dairies, Xchanging and Yell Group, among others. Some of those taking their place in just over a week are Betfair, AZ Electronic Materials and Exillon Energy.
A positive reaction to results from investors was the theme of the day on the mid-tier index, with Micro Focus putting on 15.7p to 373.8p even though the Berkshire-based software company's first-half figures revealed nothing more than what was expected.
Its adjusted core earnings were up just 1.3 per cent, and the group said that the final six months of the year would not see much of an improvement. Still, the figures were welcomed by Panmure Gordon's George O'Connor, who said there were no surprises, "which the market was concerned about".
Carillion enjoyed a similar move up, as it made 15.9p to 370.7p after forecasting strong growth for its full-year pretax profit. However, Stagecoach did not manage to impress investors, dropping 3p to 212p despite releasing first-half figures that were above expectations. Clearly, the markets weren't as keen as Galvan Research's Ed Woolfitt, who said the bus and train company was "in pole position as the best listed UK transport play".
Kesa Electrical's first-half figures were an opportunity for the company to be questioned on Knight Vinke, which now owns the second-largest stake in the electricals retailer. There has been speculation that the activist investor will try to persuade the owner of the Comet brand to sell off parts of its business, but Kesa's chairman David Newlands described the relationship between the two as "normal".
However, Altium Securities said it would be a good strategy, adding that "the best way to realise shareholder value is to break the group up". Despite Kesa's strong numbers showing a profit rise of over 50 per cent, it suffered a small drop of 2.3p to 169.6p.
On the Alternative Investment Market, there was a major lift for First Artist as the advertising and events company rocketed up by over 25 per cent. The group ended up 1.92p stronger on 9.05p after it revealed that Pivot Entertainment – which was previously interested in taking over the group – is buying £2.5m worth of shares.
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