Market Report: Investors push up Sage on Oracle takeover talk
Wednesday 11 May 2011
As Microsoft announced a $8.5bn (£5.2bn) deal to buy Skype, investors were hungry for further takeover activity in the technology sector last night after bid chatter pushed Sage high up the blue-chip index's leaderboard. The software company surged forwards 10.2p to 296p following the emergence late in the session of vague speculation that it could be about to receive an approach.
With a possible price being discussed of between 450p and 500p-a-share, a number of groups were rumoured to be considering a potential move including the US giant Oracle. Chitter-chatter has linked the two before, and one market voice said Sage's cheap valuation – plus its customer base of over six million small and medium-sized businesses – meant the idea was "not impossible". Other companies mentioned in the speculation included IBM and Intuit.
The takeover spotlight has settled on a few of the technology companies in the past few months, with vague rumours playing a role in Misys – 4.7p better off at 348.2p – putting on nearly 10 per cent this week. Autonomy, which increased by 51p to 1,726p, has also been the subject of speculation recently, while Micro Focus – down 0.6p to 384.4p – revealed in April it had received a preliminary approach.
Overall, the FTSE 100 managed to move back above the 6,000 point mark, climbing 76.2 points to 6,018.89. The miners were helped by commodity prices rising after China's trade surplus figure came in almost four times higher than expected, and Rio Tinto finished as the sector's top dog, powering up 100p to 4,235.5p as Royal Bank of Scotland initiated coverage with a "buy" rating.
Those hit by the drop in oil prices last week received some encouraging words from Credit Suisse, which said it believed "global demand remains robust" for the black stuff. "Oil demand continues to outstrip supply and should further dent spare capacity," said the broker, which highlighted Royal Dutch Shell – 52p ahead at 2,249p – as the top pick among its European peers.
A number of companies enjoyed a boost from positive trading updates, including InterContinental Hotels which was driven up 49p to 1,298p as it posted expectation-beating figures for the first quarter. Meanwhile, Imperial Tobacco was lifted 67p to 2,224p after unveiling a £500m share buyback scheme and plans to increase its dividend payout ratio alongside the cigarette manufacturer's figures for the first half.
The top spot was taken by Schroders as it managed to halt a four-day losing streak, prompted by last week's interim management statement, in which the group dropped over 13 per cent. Rebounding 93p to 1,750p, the fund manager was given a helping hand by Numis Securities' decision to upgrade its rating to "buy" from "add", with its analyst David McCann saying its growth figures for the first quarter were "hardly a lousy result for a company of this scale".
Also seeing a bounce was Centrica, with the British Gas-owner 5.2p higher at 308.7p after being knocked back 12p on Monday following its latest update. Morgan Stanley was the broker fighting the group's corner, saying the "issues flagged were already well known", and it recommended the sell-off as "a good entry point".
The session's most eye-catching move came on the FTSE 250, where investors were switching off Pace in their droves after it issued a profit warning which the set-top box manufacturer blamed partly on supply chain issues caused by the recent tragedy in Japan. By the bell it had declined 59.9p to 93p, with the fall of nearly 40 per cent the latest in a terrible run that means it currently trades nearly 140p lower than in February.
Near the mid-tier index's summit, Premier Foods advanced 2.08p to 34.83p on hopes that, despite its share price more than doubling since last November, it still has further to go. Citigroup helped the optimism, raising the group's target price to 40p and changing its rating to "buy", with the broker's analysts saying that "whilst the upside has reduced over the last few months, the risk has decreased considerably".
Meanwhile, traders noted investors were becoming more and more confident about the Hovis-owner's turnaround following the disposals earlier this year of its canned foods and meat-free businesses as well as last month's announcement that it will have a new chief executive by this time next year.
Elsewhere, Imagination Technologies eased forwards 5.1p to 469p after signing a licensing deal with MediaTek. Evolution Securities' Philip Sparks said he expected the Taiwanese group to start shipping a chip containing Imagination's technology within 12 months, adding that it could become the UK company's "most important customer outside Apple".
Down on the Alternative Investment Market, Xcite Energy plummeted nearly 25 per cent – sinking 79p to 237.5p – following an independent report on its Bentley oil field in the North Sea which revealed its commercial value was lower than expected.
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