Market Report: Shareholder unrest puts bid focus on AstraZeneca
The takeover spotlight was on the pharmaceuticals sector again yesterday, but for once it was not Shire in the glare. Whereas the drugs maker tends to be the usual subject of bid speculation, it was its larger peer, AstraZeneca which was having its takeover potential bigged up.
Unrest around the group has been growing, with reports emerging recently claiming a number of major shareholders are agitating for major changes among the top brass. Driving their anger has been the fact that Astra – which has a super-thin pipeline of new drugs and is facing a stark "patent cliff" of products losing their exclusivity – has found itself trading at a significantly lower valuation than its rivals.
Its valuation is so "dramatic", argued UBS's Gbola Amusa, that it may even persuade a possible bidder to emerge. The analyst claimed any aggressor who did make a move could release as much as $53bn (£33bn) of value by shutting the company's research and development unit.
He was supportive of various other shake-up scenarios, suggesting Astra could downsize its R&D operations itself. He calculated a cut of 25 per cent would generate enough funds for the firm to go shopping and make its own acquisition worth roughly $13bn.
However, Mr Amusa – who kept his "buy" rating – also argued that even "the 'status quo' is likely to lead to high shareholder returns". Nonetheless, Astra managed only a modest rise of 14p to 2,807p as traders noted scepticism in the City over the possibility of it becoming a bid target because of its size. At the same time, Shire (up 14p to 1,952p) revealed it had been splashing out, agreeing to buy the assets of US vascular repair technology firm Pervasis.
Having been gripped by caution for much of the day, rumours that Chinese GDP data set to be released late last night would beat expectations helped the FTSE 100 close 75.72 points stronger at 5,710.46. It means the benchmark index has almost recovered all of the losses suffered during Tuesday's sharp sell-off.
Also instrumental to switching the market's mood was Royal Dutch Shell saying it was confident an oil sheen between two of its platforms in the Gulf of Mexico did not come from its operations. Earlier in the day the energy giant had slumped close to 2,070p on fears it could be an oil spill, prompting thoughts back to the 2010 Gulf of Mexico disaster from which BP's share price has still not recovered.
However, by the bell Shell was just 11p lower at 2,174p, although it was still one of just five blue-chip groups in the red.
Meanwhile, BP edged up 0.6p to 444.85p as the oil firm faced the wrath of environmental protesters at its annual meeting in east London.
Goldman Sachs' analysts decision to add ITV to their"conviction buy" list helped the Downton Abbey-broadcaster jump 3p to 86.1p, with the scribblers noting it "remains the only free TV takeover candidate in our view".
GKN advanced 11.8p to 203.3p after Credit Suisse raised its rating to "outperform", claiming concerns over the possibility of the engineering giant snapping up Volvo's aircraft business were now in the share price after its recent slide.
Meanwhile, Jefferies said the £275m takeover by US firm Cytec Industries of small-cap Formula 1 bodywork maker Umeco (which was 48.8 per cent higher at 559.5p) provided a positive read-across to GKN's aerospace division. The deal was also being touted by some as encouraging for Morgan Crucible and Cookson, which powered up 17.9p to 331p and 27p to 723.5p respectively on the FTSE 250.
Cable & Wireless Worldwide flew up 7.81 per cent to 35.46p ahead of next week's deadline for Vodafone (0.2p stronger at 169.9p) and India's Tata to announce whether or not they will make a bid for the telecoms group. Punters' hopes were given a boost by reports claiming the latter will have sorted a $2bn loan by 19 April, which is decision day.
Gold diggers Centamin and African Barrick Gold (ABG) were enjoying rather differing fortunes. The former climbed 3.2p to 66.4p after only narrowly missing production estimates for the first quarter despite a workers strike last month. ABG, however, took the mid-tier index's wooden spoon by dipping 19.5p to 351.2p as Goldman Sachs' analysts turned sellers, saying the group was "structurally disadvantaged relative to its peers".
Stellar Diamonds was certainly not an investor's best friend yesterday. The precious stones producer fell 30.61 per cent to 4.25p on AIM after announcing that Sierra Leone's ministry of mines claims two of its licences in the country should not have been renewed and that therefore Stellar no longer has these mineral rights.
Elsewhere, tiddler ViaLogy ticked up 0.38p to 2.5p as the software company revealed it had won a contract with Indian energy behemoth ONGC.
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