18th Jul 2016 15:55
LONDON (Alliance News) - London stocks closed higher Monday, boosted by ARM Holdings, which saw its share price fly higher after agreeing on a GBP24.3 billion cash takeover by Japan's SoftBank Group.
The FTSE 100 tech firm, which designs chips used in smartphones and other connected devices, said SoftBank will pay 1,700.00 pence per share in cash, a 43% premium to ARM's closing price on Friday of 1,188.73p and a 42% premium to the all-time high that ARM shares hit in March 2015.
ARM shares closed up 44% to 1,714.21 pence Monday, by some distance the best performer in the blue-chip index.
ARM said the takeover is a "great deal for the UK" as its suitor pledged to double the company's UK workforce and keep the firm at its Cambridge headquarters.
The deal was described as both a vote of confidence for the UK following its vote to leave the European Union late last month and potentially as the first sign of an expected rise in takeover offers for UK businesses in light of the sharp depreciation of sterling following Brexit.
That expectation of further UK takeover activity helped boost shares in ARM's smaller peer Imagination Technologies Group, which ended up 10%.
However, ARM's founder Hermann Hauser tweeted: "ARM is the proudest achievement of my life. The proposed sale to SoftBank is a sad day for me and for technology in Britain."
SoftBank emphasised plans to accelerate investment in the fast-growing 'Internet of Things' space, marking a significant step in ARM's diversification away from the slowing, historically dominant smartphone segment.
A number of analysts have suggested the deal is unlikely to face any regulatory hurdles, which also makes it less likely to be subject to counterbids.
Numis analyst Nick James said "there are a number of others that may like to own ARM, particularly Intel, Qualcomm or possibly the Chinese Tsinghua Unigroup (which is controlled by the Chinese government). However there would be significant regulatory issues in all of those scenarios, whereas the Softbank deal will close relatively quickly."
The FTSE 100 closed up 0.4%, or 26.18 points at 6,695.42. The FTSE 250 ended up 0.8%, or 140.39 points, at 16,867.66, and the AIM All-Share rose 0.3%, or 2.43 points, at 726.65.
Stock markets in mainland Europe closed lower, with the French CAC 40 ending down 0.3% and the German DAX 30 closing slightly lower.
On Wall Street at the London close, the DJIA was up 0.1%, the S&P 500 was up 0.2%, and the Nasdaq Composite was up 0.6%.
The Bank of England's Martin Weale said he sees no urgency to ease monetary policy due to the uncertainty caused by the UK's vote to leave the European Union.
"This uncertainty points to the argument that we should wait for firmer evidence before making any policy change and least in the absence of any strong arguments for an immediate change," Weale said in his final speech as a member of the rate-setting monetary policy committee.
Weale rejected the argument that markets would be disappointed were there to be no easing in August, saying the bank "is not a nurse to markets."
This contrasts with the view given by fellow MPC member Andy Haldane on Friday, who said that "material easing of monetary policy" will be required next month to maintain confidence in the UK economy.
Ben Broadbent will be the next member of the MPC to make a speech after the central bank's surprise decision to keep its interest rate unchanged last week. Broadbent will be speaking at 1505 BST on Tuesday.
The pound was supported by Weale's comments and at the London stock market close traded the dollar at USD1.3304 versus USD1.3232 at the same time on Friday.
The euro traded the dollar at USD1.1080 at the close Monday, a touch higher than the USD1.1067 seen at the close Friday.
Oil prices fell on Monday, with Brent crude quoted at USD46.71 a barrel at the European equities close on Monday, having traded at USD47.59 a barrel at the same time on Friday.
Gold was largely unchanged, trading at USD1,328.10 an ounce at the close Monday against USD1,329.24 at the close Friday.
Travel operators were again amongst the worst performers in London's main indices after the failed military coup in Turkey added to the already damaged sentiment on the sector. The political turmoil in Turkey came after the terrorist attack in Nice, France last Thursday.
Numis said the geopolitical tensions will place further strain on the travel and leisure sector which was already under pressure in the aftermath of the UK's vote to leave the EU.
The bank highlighted that mid-cap operator Thomas Cook Group had around 20% of its summer 2016 capacity in Turkey at the start of the year, making it the most exposed to the region. The stock ended down 0.9%. TUI Group was one of the worst performers in the FTSE 100, down 2.3%.
Transense Technologies' share price surged 60% after the sensor systems manufacturer said it had signed a licensing agreement with US conglomerate General Electric and that trading in its first half met its expectations.
The company said GE has agreed to licence its Surface Acoustic Wave technology for certain torque applications. GE will pay USD500,000 to Transense on signing of the deal, plus another USD250,000 dependent on the technology passing various tests GE will conduct. GE will then pay Transense royalties on each unit which uses the technology.
The main focus in the economic calendar on Tuesday is UK inflation data at 0930 BST. This is followed by ZEW economic sentiment surveys for Germany and the eurozone both at 1000 BST. US housing starts and building permits are at 1330 BST, before the Redbook index on US general retail sales at 1355 BST.
In the UK corporate calendar, overnight Rio Tinto reports a second quarter operations review. On Tuesday, there will be a trading statement from postal service operator Royal Mail and dairy producer Dairy Crest Group. Online trading firm IG Group Holdings releases full-year results, while miner Polymetal International and steel, mining and vanadium business Evraz both release second quarter production results.
By Neil Thakrar; [email protected]; @NeilThakrar1
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