Market Report: Technology takeover chatter moves to Pace
Thursday 25 August 2011
Reheated bid rumours prompted investors to switch on to Pace yesterday, with the set-top box maker surging 10 per cent, or 9.65p to 104.1p, to top the mid-tier index following vague mutterings a number of companies could be considering an approach.
The likelihood of Pace being snapped up has often been discussed in recent months, thanks in part to a profit warning in May that has helped its share price drop by over 40 per cent since the start of the year.
Yesterday market gossips, saying it could attract an approach worth between 150p and 175p a share, suggested there were as many as three potential aggressors, with talk of possible interest from its US peer Cisco and an unnamed South Korean company.
The mutterings came in the wake of Hewlett Packard agreeing a £7.1bn takeover of Autonomy (up 4p to 2,494p) last week, which has seemingly resulted in raised hopes of further bid activity among the technology companies.
Recent days have seen renewed speculation Misys, which was lifted 4p to 264p, could be in line for a break-up bid, while earlier in the week Arm Holdings became the subject of takeover rumours once again.
Yesterday the chip designer was bumped up 16p to 530p after Merchant Securities' Brendan Long highlighted chatter Apple could soon be introducing a cut-price iPhone 4, which the analyst said would "raise the outlook" for the Cambridge-based company as he kept his "buy" rating.
Encouraging data from the US on durable goods helped the FTSE 100 to continue its recent run as it powered up 76.43 points to 5,205.85. The benchmark index has now moved over 160 points higher this week alone, but traders were refusing to get too excited, with one noting the relatively low trading volumes and warning it felt like a short-covering rally.
The banks, which have been especially badly hit over the past few weeks, managed to bounce, with Royal Bank of Scotland rising 9.35 per cent, or 1.87p, to 21.87p. Lloyds Banking Group was higher as well, ticking up 1.81p to 30.11p, while Barclays advanced 4.15p to 149.6p.
Glencore International was another major riser, increasing 22.15p to 389.6p ahead of the release today of its interim results, as the commodities trader announced it was offering $281m to buy the shares in the Australian nickel miner Minara Resources it does not already own
Tesco was left among the stragglers, as the supermarket crept forwards just 0.1p to 377.3p. The group was knocked by Citigroup warning it and its peers needed to wake up to the threat from their discount rivals, saying recent data showed Aldi and Lidl saw like-for-like sales growth in July of 20 per cent and 10 per cent respectively.
Claiming the figures suggested shoppers were "trading away from supermarkets", the broker's analysts reiterated Tesco's "sell" rating, although they did keep their "hold" recommendation on Sainsbury, and it gained 2.6p to 305.5p.
A profit warning from Heineken, which blamed a drop in consumer confidence for it cutting its expectations for the year, meant Diageo was drowning its sorrows. The Guinness brewer was pegged back 4p to 1,118p, as it also revealed it had bought an additional 5 per cent stake in the Vietnamese spirits producer Halico. However, Heineken's gloomy outlook did not prevent SABMiller, whose brands include Grolsch, from pushing up 37p to 2,124p.
The biggest faller on the blue-chip index was Admiral, despite the car insurer revealing a rise in its first-half profits of 27 per cent. Investors were discouraged in part by an increase in the percentage of premiums paid out in claims, as the group dropped 11.86 per cent, or 182p, lower to 1,353p.
Down on the FTSE 250, Unite enjoyed a much better reaction to its interim results, climbing 10.5p to 163.4p after the student landlord said not only was it on course to match its full-year expectations but that its profits could end up coming in higher than previous anticipated.
Melrose slipped 1p to 294p after the buyout group, which released its interim results, said the "put up or shut up" deadline for it to submit a new bid for Charter International should be extended. The company has had two bids rejected, with the final one valued at 840p, and earlier in the week Charter, which closed 19p behind at 728p, announced it had received a new approach from a third party.
Pinewood Shepperton was pulling in the viewers, with the small-cap studios group putting on 17.12p to 223p after its first-half operating profits before exceptional items increased 127 per cent. The group, which cited strong demand from both large film and television productions, also said its revenue had jumped by more than a third.
Meanwhile, down on the Alternative Investment Market, an oil discovery west of Shetland helped Faroe Petroleum to rocket 21p to 159p.
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