Market Report: Reed Elsevier may be next to feel shareholders' fury
Will Reed Elsevier be the next to be swept up in the "shareholder spring"? With investors increasingly flexing their muscles, City scribblers were wondering yesterday whether the publishing and exhibitions giant may be forced into action.
Amid unhappiness over the performance of its share price, there has been no shortage of voices calling for the group to shed one or more of its divisions.
Panmure Gordon's Alex DeGroote has been one of the loudest, and yesterday – after attending an investor day focused on both Reed's exhibitions business and its trade magazine unit RBI – he reiterated his call for a break-up.
However, the investors' revolution has also given a boost to his confidence, with the analyst saying that such a scenario now "appears more likely given current market-wide shareholder activism".
He is certainly not the only one urging a shake-up. Mark Braley of Deutsche Bank said the event "reaffirmed many of the negatives regarding the broader group structure" – not what Reed's bosses will have had in mind.
"It is much less than clear that [the company] is a 'natural home' for either of these businesses," he added, arguing that they were "unlikely to get the attention or capital that they need to truly prosper".
Despite their grumblings, both scribes continued to recommend Reed as a "buy". Investors were not so keen, however, as the group edged back 2.5p to 508.5p.
At one point it looked as if a bad week was going to turn into a terrible one as the FTSE 100 plummeted towards the 5,500 level. Yet encouraging consumer confidence data from across the Atlantic helped the top-tier index to finish 31.57 points stronger at 5,575.52, although it has still lost nearly 80 points over the past four sessions.
A slowdown in China's industrial production growth meant the heavyweight miners were the biggest fallers, with Eurasian Natural Resources left with the wooden spoon after being driven back 20.5p to 516.5p.
The banks were also weighing on the Footsie following JP Morgan's admission that it had suffered a $2bn trading loss in a mere six weeks – Barclays, the worst of the lot, crashed down 6p to 202.8p.
There was a number of bid favourites up on the blue-chip leaderboard, including Hammerson, as the developer was lifted 13.3p to 429.8p in the wake of analyst speculation earlier in the week it could be a potential takeover target for Aussie rival Westfield.
Severn Trent was given another push by Deutsche Bank's James Brand, who continued to press his view there could be further takeover activity among the utilities, saying a possible approach for the water firm – which closed 51p stronger at 1,693p – could be worth 2,000p.
However, he added that rivals United Utilities (up 12p to 642p) and Pennon (up 13.5p to 746p) may "offer much more material upside if taken over".
Meanwhile, Shire puffed up 58p to 2,048p after Nicolas Guyon-Gellin of Exane BNP Paribas suggested a takeover valuation of 2,900p a pop if the drugs maker ever does finally receive an approach.
The power of the grey pound was being bigged up by the City as analysts from Bank of America Merrill Lynch eyed up those retailers set to benefit most from the second wave of the post-war baby boomers moving into later life. Arguing that an increase in womenswear purchases from those over 45 is good news for the high street in general, they picked out Marks & Spencer – whose advertising campaigns are fronted by the Sixties supermodel Twiggy, left – as the best placed.
The scribblers also highlighted Debenhams and upgraded their rating on both to "buy", prompting the department store up 3.85p to 80.8p, while M&S advanced 12.1p to 360p.
The sector was also helped by impressive weekly sales figures from John Lewis, while Home Retail (2.9p stronger at 81.25p) received some rare broker support. With the Argos-owner having dropped over a fifth since its final results at the start of the month, Liberum Capital decided it was time to remove its "sell" advice, although it still warned it was "by no means clear that management and the board are any closer to a strategy beyond cost cutting and hoping for a recovery".
Proximagen fattened up 45.12p to 257.5p following the US FDA approval of its peer Arena Pharmaceuticals' obesity drug, which is similar to a product being developed by the AIM-listed biotech company.
Elsewhere, the agrochemical firm Eden Research stayed flat at 19.5p on its debut after moving from PLUS Markets to AIM.
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