Market Report: US takeover chatter helps Kingfisher soar
Wednesday 17 August 2011
Kingfisher flew up the blue-chip index last night after vague rumours suggested that two of its fellow DIY retailers from across the Atlantic could both make a move for the B&Q owner.
A surge in the last hour of trading meant the group finished 5.2p higher at 236.5p, as speculation spread that Home Depot (which raised its profit forecast for the year yesterday) and Lowes may consider it an attractive way to expand into Europe. As well as its flagship business in the UK, Kingfisher owns market-leading chains in Poland, France and Turkey.
It is not the first time the two US companies have been linked to Kingfisher, and it has also been talked about in the past as a potential target for private equity. Yesterday's renewed mutterings – according to which a potential bid for the group could be worth between 325p and 350p a share – was being taken with a pinch of salt by some in the City, although one trader did concede that "stranger things have happened".
Disappointing GDP figures from Germany appeared to set the tone for the session, as the FTSE 100 initially slumped as low as 5,265.83 points. Yet despite there being little optimism over the outcome of yesterday's summit between Nicolas Sarkozy and Angela Merkel on the eurozone crisis, the top-tier index – helped by encouraging industrial production data from the States – managed a late turnaround to close 7.05 points better at 5,357.63 and stretch its winning run to a fourth session.
Despite the improvement, however, the defensive appeal of the precious metal producer meant Randgold Resources took the top spot, increasing 255p to 6,435p as the price of the yellow metal went up.
It was a rather more mixed session for the rest of the miners, with Vedanta Resources and Antofagasta retreating 42p to 1,383p and 36p to 1,228p respectively.
Meanwhile, Rio Tinto moved up 35p to 3,729p after Heath R Jansen of Citigroup named it as the broker's "most preferred" stock in the sector, saying the group "has de-rated over the past three months to the extent that it is now the cheapest diversified miner on our estimates".
"In addition we have become increasingly confident that the iron ore market will not become as oversupplied in the middle of the decade as previously expected," the analyst added, who pointed out the commodity provides around 70 per cent of Rio Tinto's earnings.
With its pipeline in the North Sea still leaking oil, in what is now believed to be the worst spill in the UK for more than 10 years, Royal Dutch Shell was 10p behind at 2,005.5p. Meanwhile, on the FTSE 250 Heritage Oil powered up 2.7p to 227.9p after it announced it had managed to more than triple production at its Zapadno Chumpasskoye field in Russia.
After its boost on Monday from rumours that it could become a target for the US casinos group Wynn Resorts, Bwin.party continued to rise, climbing 8.5p to 114.2p. The world's biggest listed online gambling group had its "buy" rating reiterated by UBS, which said its current share price not only discounted all its operations in Germany, where it is facing proposed strict new regulations, but also assumed a sharp deterioration in the rest of the group's performance.
Pace was not far behind, shooting up 5p to 105.7p in the wake of Google's acquisition of Motorola Mobility, revealed earlier in the week. While some said the $12.5bn (£7.6bn) deal highlighted the low valuation of the set-top box manufacturer, Espirito Santo added that "as pay TV operators perceive Google as a threat, over the medium term customers could potentially lower their reliance on Google-Motorola, which bodes well for Pace".
The takeover was also boosting sentiment around Arm Holdings, with Merchant Securities highlighting it as positive for innovation in the world of smartphones and tablets. The broker said the top-tier chip designer was "ideally placed to take advantage of the move to greater portable processing power", and it advanced 5p to 525.5p.
Thomas Cook ended up taking last place as the troubled tour operator dipped 8.17 per cent, or 4.65p, to 52.25p despite the Competition Commission giving the green light to its merger with the high street travel businesses of the Co-op.
Down on the small-cap index, Sportingbet shot up 3.5p to 53.5p after it emerged that the online gaming company was discussing the possibility of the AIM-listed GVC Holdings buying its Turkish website. A successful disposal, said Evolution's James Hollins, could "pave the way for a Ladbrokes takeover of the group", as the bookmaker slipped 2.6p to 126.5p.
Evolution itself was in focus as a bid target, with the investment bank – which pushed up 7.5p to 90p – revealing it had received other approaches alongside the ones from Investec and Canaccord Financial.
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