Market Report: Severn Trent dives as bid failure looms
Tuesday 11 June 2013
Severn Trent shares fell almost 6 per cent as it appeared increasingly likely that a £5.3bn takeover bid from the LongRiver consortium, which is made up of Ontario pension fund Omers' infrastructure arm Borealis, the Kuwaiti Investment Office and the UK Universities Superannuation Fund, would fail.
LongRiver has until 5pm today to come up with an official offer. So far it has made three conditional offers, culminating with one at 2,200p a share on Friday. All have been firmly rejected by Severn Trent's board.
LongRiver warned that it would walk away if Severn continued to refuse to talk to it. Michael Rolland, the president and chief executive of Borealis, said: "The Severn Trent board has shown no interest in discussing our pre-conditional offer with us. In the absence of any such engagement, there will be no further proposal from the consortium and no offer for Severn Trent shareholders to consider."
There were no indications yesterday of any talks starting, and one major institutional shareholder was quoted as saying it wanted an offer of 2,300p a share.
Severn Trent shares fell 124p to 1,946p. Ahead of the bid, they were trading around 1,820p.
Elsewhere in the City, investors tuned in to ITV as they programmed in the potential of a £1.3bn windfall. The square-eyed media experts at Liberum Capital predict the broadcaster could return £1.3bn of cash to shareholders over the next three years because it is "increasingly clear free-to-air television advertising is structurally resilient".
Liberum rates ITV its top pick in media and suggest its "structural position is better than consensus thinks". It believes that TV viewing is growing, advertising revenue is up and broadcasters are primed to exploit online video revenues. They also think that ITV will gain share "with Channel 4 likely to weaken".
ITV has had a strong run of producing successful series, and yesterday it announced it had sold its period drama Mr Selfridge in 99 countries worldwide. Liberum upped its target price from 155p to 200p, and said it also predicted ITV's "retransmission revenues could be an area of potential growth". Punters piled in on Liberum's recommendation, helping ITV to rise 4.8p to 134.2p.
Overall, the FTSE 100 was on another downer after disappointing Chinese trade data. It dipped 2.75 points to 6,409.24, following a gain on Friday.
William Nicholls, a trader at Capital Spreads, said: "Mixed US jobs numbers on Friday reminded markets that a long-term recovery will happen but in the short-term, economic stimulus is likely to remain.
"Unfortunately China reported more disappointing trade data at the weekend, which has inhibited markets from making another move to the upside. As the world's largest metals consumer, this impacts metals and miners more than any other in the FTSE 100."
Among the mid caps, Ocado reached an all-time high of 312p as traders speculated that short-sellers were covering their positions.
The builders' merchant Travis Perkins added another 4p to 1,534p.
However, the Cambridge-based tech company Xaar, a small-cap inkjet specialist, soared 169p to 807p after a strong trading update. The broker N+1 Singer said the global demand for Xaar's digital inkjet technology had accelerated "across each of the group's end markets, providing additional comfort regarding longer term growth prospects", and it is "firing on all cylinders".
The analyst raised its 2013 forecasts by 45 per cent and rates it a buy with a 830p price target, up from 590p. The share price rise pushed its market capitalisation to £580m, increasing the likelihood of inclusion in the FTSE 250 after the reshuffle this week.
Over on Aim, Toscafund upped its 8.5 per cent stake in the online dating group Cupid to 10.3 per cent, and Cupid fluttered up 1.75p to 73p.
The miner Gemfields updated on problems in Zambia. It had been about to auction its emerald and beryl from the Kagem emerald mine in Singapore, but this has been put on hold pending clarification from the Zambian Ministry of Mines on proposed restrictions on certain forms of emerald exports.
Gemfields said it is "actively corresponding with the ministry and hopes that solutions supporting the continued growth of Kagem and the wider Zambian emerald sector will be reached as soon as possible". It weakened 1.375p to 23.25p.
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