Market Report: Vedanta tops the Footsie after talk of unit merger
The simple way in life can often be the best. That was certainly what Vedanta Resources found yesterday, with the miner ending up at the Footsie's summit after a promise to tackle its complicated structure amid chatter that two of its units could be about to merge.
Many in the Square Mile have remained rather wary of the India-focused group thanks to the rather complex way it is organised. One of the results of this has been fears following the recent $8.5bn (£5.38bn) acquisition of a majority stake in Cairn India that Vedanta's subsidiaries could have problems servicing its debt.
Yet last night it closed at a six-and-a-half month high after reports from India claimed that its Sterlite and Sesa Goa units – both of which have separate listings – could merge. This prompted Vedanta into releasing a statement that neither confirmed nor denied the speculation but instead stated its aim to "simplify and consolidate its corporate structure".
Traders were a big fan of the idea, saying such a move would make the stock easier to understand.
"The problem with Vedanta as an investment is that you don't really know what you are getting," said one.
Investors were also keen, and despite some City voices noting Vedanta has previously talked of its wish to simplify, it was still fired up 95p – or 7 per cent – to 1,453p.
Deutsche Bank's analysts were also helping the group by raising their target price to 1,720p and upping their forecasts across the sector, citing the "unexpectedly strong start to the year" for metal prices.
Kenmare Resources was another of the diggers surging up, with it shifting 9.04 per cent to 61.5p on the mid-tier index. The rise was accompanied by the revival of bid speculation around the miner, which has been recently linked with a possible move from Rio Tinto (down 6.5p to 3,699.5p), although traders were not keen.
It was not the only familiar tale doing the rounds. A late spurt saw ITV finish 1.5p better off at 79.55p as vague rumours made a return that Apple could be interested in a potential approach.
The City may have woken to the news that Greece was finally going to get its second bailout, but – with a great deal of scepticism over whether the deal was a long-term fix – the FTSE 100 failed to push on from a seven-month high, instead dipping 17.05 points to 5,928.2.
It certainly didn't help the banks, and Lloyds and Barclays retreated 0.6p to 35.75p and 3.15p to 247.75p respectively, while Royal Bank of Scotland – which releases its full-year numbers tomorrow – was knocked back 0.27p to 28.21p.
Admiral drove up 32p to 1,043p after Credit Suisse decided to shift gear on the car insurer – which released a profits warning last November – and upgrade its advice to "outperform". Ahead of the group's final results next month, the broker's analysts said they were "increasingly confident that current challenges are temporary", while Nomura also helped by reiterating its "buy" advice.
It may have finally managed to complete the $2.9bn deal to bring in giants CNOOC and Total to help develop its fields in Uganda, but Tullow Oil was still knocked back 58p to 1,543p. The damage to the explorer was done by news from Sierra Leone where drilling results at its Jupiter-1 well disappointed, despite oil being struck.
Investors in Homeserve were getting increasingly nervous over its long-standing discussions with the FSA regarding possible insurance mis-selling in the wake of the suspension of trading in CPP's shares earlier in the week following demands from the City watchdog.
The home repairs group saw its shares slip back 8.4p to 226p as Espirito Santo's David Brockton said the developments "offer insight into the severity with which the regulator can act", although he also added that there were major differences between the two cases.
Those hoping Croda International could become a bid target had cold water thrown on their hopes after the cosmetics chemicals group said it did not want to be taken over. Nonetheless, it still powered up 92p to 2,123p following expectation-beating, full-year results, with the move helping its chances of being promoted to the top-tier index in the next indices reshuffle.
Down on AIM, impatient punters left Desire Petroleum 9.03 per cent worse off at 32.75p after the explorer said they would have to wait a little bit more for analysis results from its Falkland Island operations.
Elsewhere, Touchstone Gold was in glittering form, jumping 1.12p to 19.62p when it revealed encouraging drilling results from its yellow metal search in Colombia. Meanwhile, Belvoir enjoyed a positive first day of trading. The lettings agency's shares floated at 75p a pop and finished at 82.5p.
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