Market Report: Logica bid puts spotlight on tech takeover targets
The Square Mile was clearly in a greedy mood yesterday. Those hungry for takeover activity may have had a £1.7bn deal to savour, but there was still appetite for more. As a result, following the news that Logica's days of independence were numbered, the search was on to find out who was next in line.
To be fair, there were plenty in the tech sector to choose from. Although Logica's takeover potential has often excited the market gossips, it has been by no means the only one.
Sage was among the companies to whom the bid focus switched, as the business software firm climbed 5.9p to 256.5p. It was one of the stocks highlighted by Numis Securities' David Toms, who said the fact the Logica deal has come in the wake of Misys and Autonomy recently being snapped up "suggests... the UK sector is potentially materially undervalued".
The analyst – whose advice is simply "buy everything" – is expecting further M&A activity in the sector. He suggested that Sage as well as Micro Focus (up 6.3p to 444.3p) could be targets from "a 'value' perspective" and said that, for those looking for growth, Fidessa (up 44p to 1,540p) and Aveva (up 4p to 1,666p) may be "attractive assets".
Meanwhile, punters were banking that CGI's 105p-a-share offer would not be the end of the matter as Logica moved even higher, advancing 45.2p – or 68.8 per cent – to 110.9p. While some were dismissive of the idea of a counter-bidder, Panmure Gordon's George O'Connor said it was "attractive enough to flush out another buyer".
Strong for much of the session, a late slide left the FTSE 100 just 9.67 points ahead at 5,306.95 by the bell. That means the benchmark index has lost 7.5 per cent over May, making it the worst month since February 2009 – good news for those who stuck to the old trader's motto of "sell in May and go away".
Disappointing jobs data from across the Atlantic was causing jitters ahead of today's closely watched non-farm payroll figures as, at the same time, US GDP for the first three months of the year was revised down.
Meanwhile there was nervousness in the Square Mile following a number of trading houses handing out P45s recently, with broker Seymour Pierce the latest.
Fears that what was supposed to be a "summer of love" could be more of a washout left ITV 4.4p lower at 72.9p. Companies have been expected to up their advertising spending thanks to Euro 2012, the Olympics and this weekend's Jubilee celebrations. However, after chatting to some media buyers, analysts from Liberum Capital said the picture was not looking so rosy. Citing talk claiming that some planned campaigns have been scrapped, they warned that the television advertising market could be down at least 10 per cent in July and roughly 5 per cent in August. This, they noted, implied a fall of around 4 per cent for ITV over the third quarter, despite initial suggestions that the broadcaster of Simon Cowell's Britain's Got Talent would see growth of 4 per cent or more. ITV was also knocked by the news that the institutional investor Legal & General had cut its stake of almost 4 per cent to under 3 per cent.
The biggest blue-chip riser of the day was InterContinental Hotels, with the Holiday Inn owner moving up 88p to 1,526p. Having been touted as a possible bid target earlier in the week, yesterday it was helped by the announcement that the American billionaire and activist investor Nelson Peltz had built up a 4.27 per cent stake in the hotels company.
Admiral was left in last place after being pegged back 80p to 1,039p. The insurerwas stuck in reversefollowing the news that the car insurance industry looks set to face a Competition Commission inquiry.
Simon Borrows, the new boss of 3i, was trying to show the way to investors. On the announcement that the chief executive had spent £6.9m on its shares earlier in the week, the privateequity firm – whose diverse portfolio of investments include the luxury lingerie seller Agent Provocateur and the camping retailer Go Outdoors – powered up 5.1p to 174.7p on the FTSE 250.
Rockhopper eased back 1.5p to 301.75p after the Aim-listed explorer's final results, with it managing to bring down its full-year losses. The Falkland Islands driller is trying to sign up a farm-out partner but said the location of its Sea Lion prospect had dissuaded some possible partners, although the chairman, Pierre Jungels, said he was "very pleased by the quality" of those who were left.
IT problems left NCC Group 47p worse off at 765p after the small-cap security group revealed that difficulties with a new computer system meant it was taking a one-off hit of £6.9m.
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