Market Report: Tullow climbs as Cnooc bid chatter is revived
Friday 02 September 2011
Market gossips turned their attention back to Tullow Oil yesterday, as rumours of possible bid interest from China prompted it to spurt up 34p to 1,109p on the blue-chip index.
The vague mutterings suggested the energy explorer, which has been talked about as a potential takeover target before, could be set to receive an approach from the Chinese state-owned group Cnooc worth around 1,500p-a-share.
Although traders were not completely persuaded by the chitter-chatter, they refused to dismiss it out of hand, saying that Tullow's strong presence in Africa – it holds the highest number of licences in the continent – makes it attractive to the Chinese.
The two companies are hardly strangers, being currently involved in a $2.9bn deal that will see Tullow sell stakes in its Ugandan fields to both Cnooc and the French oil giant Total. Last week Tullow – which announced a 321 per cent jump in its first-half pretax profit – said it expected the sale to be completed this month.
The session started with a bout of profit taking as the FTSE 100 slipped back in the wake of having rallied more than five per cent over the previous two days. Yet the benchmark index ended up closing ahead once again, climbing 24.12 points to 5,418.65 as manufacturing and unemployment data from the States came in better than expected, with the latter especially important ahead of today's closely watched US non-farm payroll figures.
Reports claiming big reforms on the sector may not be implemented until after the next general election gave the banks a boost, with Royal Bank of Scotland advancing 1.98p to 26.25p while Lloyds Banking Group and Barclays were lifted up 2.07p to 35.67p and 9.6p to 180.35p respectively.
It was a different story for the miners, however, with Xstrata – down 27p to 1,052p – and Kazakhmys – down 15p to 1,076p – both sliding in the wake of strong recent gains. Meanwhile, Glencore International eased back 3.2p to 418.25p after the commodity trader's interest in a takeover of South Africa's Optimum Coal as part of a consortium was confirmed.
With the next reshuffle of the indices taking place next week, things were getting interesting for two of the favourites for the drop. Hargreaves Lansdown did its chances of staying a blue-chip stock the world of good by taking the top spot after shooting up 17.71 per cent, or 76.5p, to 508.5p. The wealth manager was in demand in the wake of its full-year results, as it revealed net new business inflows over the past two months had seen a 30 per cent year-on-year increase.
There was no such joy for 3i, however, which is another one facing the prospect of relegation. The private equity investor has been the subject of bid speculation in recent weeks, but yesterday it dipped 0.6p to 211.9p despite Oriel Securities' Iain Scouller reiterating his view that if the group "continues to trade on a sizeable discount, there must be a reasonable chance of a takeover approach".
Charter International was storming up the mid-tier index, climbing 36p to 799p, after Melrose increased its takeover approach to 850p a share. In response, the engineer opened its books to the manufacturing buyout group, although it did not recommend the deal to its shareholders.
However, Numis Securities' Scott Cagehin suggested they were likely to accept "given the uncertain macro-economic back-drop", adding that Melrose – which retreated 13.8p to 300p – has already demonstrated its ability to extract value from a company while the improved offer "may force the hand of any other suitor to come forth with an offer".
Salamander Energy slumped 5.9p to 224p after the oil and gas explorer revealed it was plugging and abandoning a well, the second time it has done so in less than a month. As a result of the failure of the Cat Ba well off the shore of Vietnam, Brewin Dolphin reduced its price target to 320p, although Arbuthnot kept its "buy" advice, saying the group "still represents a buying opportunity for investors... especially given the recent share price fall".
The latest figures from Nationwide did not provide happy reading for the housebuilders, with house prices in August dropping for the first time since April. Nonetheless, the sector remained relatively cheerful as Bovis powered up 12.5p to 391.8p while Barratt Developments advanced 3.6p to 85.85p.
There was a noticeable lack of sparkle around Namakwa Diamonds after the miner announced it no longer had the £18m credit facility it had revealed in July. As a result, the company plummeted more than 60 per cent, or 16.62p, to 10.5p on the small-cap index, as it also revealed it was exiting the Democratic Republic of Congo.
Meanwhile, on the Alternative Investment Market Lochard Energy powered forwards 3.12p to 16.38p in the wake of the news that the oil group was involved in takeover talks after receiving a bid approach.
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