28th Nov 2024 16:56
(Alliance News) - London's FTSE 100 struggled for direction on Thursday, although a wave of M&A action sparked life into an otherwise quiet trading day due to a public holiday in New York.
Bids for Direct Line, Renewi and Loungers saw all three soar, while reports suggested the takeover of the Royal Mail owner is closer.
The FTSE 100 index rose 6.47 points, 0.1%, at 8,281.22. The FTSE 250 climbed 146.81 points, 0.7%, at 20,748.44, and the AIM All-Share eased 0.49 of a point, 0.1%, at 730.91.
The Cboe UK 100 ended down slightly at 831.61, the Cboe UK 250 added 0.9% at 18,248.71, and the Cboe Small Companies gained 0.6% to 15,789.72.
In New York, financial markets are closed for Thanksgiving.
It was a brighter picture in Europe, where the CAC 40 in Paris ended up 0.5%, while the DAX 40 in Frankfurt rose 0.8%.
French Prime Minister Michel Barnier announced a major concession in a bid to end a standoff with the opposition over the budget, which has caused jitters on financial markets and risks bringing down his minority government.
In a U-turn, Barnier told the Le Figaro daily that a previously planned increase for an electricity tax would no longer be included in the budget.
"Almost everyone asked me to make a change," from among his own right-wing ranks and the left-wing and far-right opposition, Barnier said.
The far right under Marine Le Pen, which as a parliamentary bloc holds the key to the government's survival, welcomed the move but said more needed to be done and reiterated a warning it could topple Barnier.
Finance Minister Antoine Armand, speaking on BFM television, told the opposition that "just because we have nothing in common" does not mean "that we plunge the country into budgetary and financial uncertainty".
Providing a further boost to the mood, consumer confidence in the eurozone ticked up a notch in November, data published by the European Commission showed.
The economic sentiment indicator edged up to 95.8 in the eurozone in November, from 95.7 in October. It had been expected to decline.
Citi said: "The surprising improvement in confidence among manufacturers, despite Trump election and tariffs threats, suggests some near-term stabilization in industrial activity may be under way (frontloading output ahead of escalating protectionism?). On the other hand, cooling sentiment among consumers and services point to a weakening domestic picture, with worsening labour markets."
The pound was quoted at USD1.2677 late on Thursday afternoon in London, down from USD1.2687 at the time of the European equities close on Wednesday. The euro stood at USD1.0549, down from USD1.0579.
Against the yen, the dollar was trading at JPY151.50, rising from JPY150.71.
In London, investors weighed a burst of takeover action, on an otherwise thin trading day.
Direct Line shares jumped 41%, while Aviva faded 2.0%. After the market close on Wednesday, London-based Aviva said it had made an approach to buy Direct Line which was rejected.
The FTSE 100 listed insurer said the cash and shares proposal was made on Tuesday last week. Direct Line shareholders would be entitled to receive 112.5 pence per share in cash and 0.282 of a new Aviva share for each Direct Line share.
Based on Aviva's closing share price on November 18, the day before the proposal was submitted, the proposal valued Direct Line at 250p per share, or around GBP3.26 billion.
It is the third bid for Direct Line this year, following two unsuccessful tilts by Belgian insurer Ageas. The two approaches valued each share in Direct Line at 233p and 239p per share, respectively.
Jefferies said given that Aviva's proposal is a relatively small uplift from the previous two offers, "we are unsurprised that the bid was rejected".
The investment bank previously suggested an acquirer might need to offer at least 270p per share.
"Direct Line has tremendous brand strength in the general insurance market and significant scale, which makes it a highly attractive takeover target. While there are a few issues to iron out, longer-term it's easy to see why a rival would want to buy the company," said Dan Coatsworth, investment analyst at AJ Bell.
But Direct Line, a Bromley, England-based motor and home financial services group, said it had concluded that the Aviva proposal was "highly opportunistic and substantially undervalued the company".
Direct Line sector peer Admiral shot up 3.0%.
Renewi said it would recommend a new takeover proposal worth over GBP700 million from Macquarie Asset Management should a firm offer materialise.
Macquarie Asset Management announced a "final possible cash offer" on Thursday, which valued the Milton Keynes, England-based waste management company at around GBP700.9 million. The offer comes over a year after the suitor walked away, following previous approaches being rebuffed.
Renewi said the offer "is at a value that the board would be minded to recommend" to shareholders.
Loungers shot up 28% to 304.80p, for a market value of GBP309.8 million.
It backed a roughly GBP340 million takeover offer from private equity firm Fortress Investment Group. Fortress will pay 310 pence in cash for each share in the operator of cafes and bars, giving a GBP338.3 million equity value and a GBP350.5 million enterprise value. It is a 30% premium to the 238p closing price on Wednesday.
Food retailers Tesco and J Sainsbury were boosted by positive comments from JPMorgan which double-upgraded both to 'overweight' from 'underweight', rising 2.3% and 3.2% respectively, while a 'buy' note from Citi supported Spirax, up 3.8%.
But housebuilder Vistry, down 3.3%, and retailer Frasers, down 2.1%, were out of favour. Both are set to exit the FTSE 100 in the latest quarterly reshuffle.
FTSE Russell provided indicative index changes late Tuesday. It said B&M European Value Retail would also exit the blue-chip index, with wealth manager St James's Place PLC, up 2.3%, set to re-join the top table.
The final index review is announced next week Wednesday, based on data as of the market close the day before.
Elsewhere, Dr Martens jumped 12%. The iconic boot maker said results for the half-year that ended September 29 were in line with its expectations. Revenue declined 18% to GBP324.6 million from GBP395.8 million, with the bottom line sinking to a pretax loss of GBP28.7 million from a profit of GBP25.8 million.
However, revenue was modestly above the consensus of GBP316 million, while a loss of GBP28 million had been projected.
Dr Martens added: "Trading since the start of the [autumn-winter 2024] season has been encouraging, with all three regions positive, albeit the peak weeks of trading remain ahead of us. Encouragingly, trading has been driven by good DTC sales of new products supported by our new product-led marketing approach."
Brent oil was quoted at USD72.74 a barrel late Thursday afternoon, down slightly from USD72.79 at the time of the London equities close on Wednesday. Gold eased to USD2,641.60 an ounce from USD2,643.13.
Friday's global economic diary sees eurozone consumer price inflation data and Canadian gross domestic product figures.
The local corporate calendar has half-year results from broker Peel Hunt.
By Jeremy Cutler, Alliance News reporter
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