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LONDON MARKET MIDDAY: DS Smith surges on takeover approach from Mondi

8th Feb 2024 12:08

(Alliance News) - Stock prices in London were mixed at midday Thursday, as markets struggled to find direction amid a mixed wave of corporate updates and earnings.

At the top of the FTSE 100 index on Thursday at midday was DS Smith, after announcing Mondi approached the firm with a GBP10 billion packaging tie-up.

The FTSE 100 index edged down 8.93 points, 0.1%, at 7,619.82. The FTSE 250 was up 83.54 points, 0.4%, at 19,188.07, and the AIM All-Share was up 2.11 points, 0.3%, at 753.57.

The Cboe UK 100 was down 0.1% at 762.32, the Cboe UK 250 was up 0.6% at 16,619.76, and the Cboe Small Companies was down 0.4% at 14,578.09.

In European equities on Thursday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was flat.

Two US Federal Reserve officials indicated Wednesday that the nation's central bank is on track to tackle inflation, but that it is still too soon to begin lowering interest rates.

"We have a labour market that is at historic levels of strength," Richmond Fed President Tom Barkin told an event in the city.

"Job gains, unemployment, job openings, initial jobless claims, all of these metrics are very strong and inflation is coming down," he said. "So I'm very supportive of being patient, you know, to get to where we need to get."

Speaking earlier the same day, Fed Governor Adriana Kugler also indicated she believed the US central bank should pause for a little longer before acting on interest rates.

"At some point, the continued cooling of inflation and labour markets may make it appropriate to reduce the target range for the federal funds rate," she said.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, commented: "But knowing that the Fed is done hiking its rates and the expectation that the next move from the Fed will be a rate cut is enough to keep the market in a sweet spot. A delay in the timing of the first rate cut is even perceived as a good thing: the US economy is doing so well that there is no urge to cut the rates right away."

The pound was quoted at USD1.2608 at midday on Thursday in London, lower compared to USD1.2623 at the equities close on Wednesday. The euro stood at USD1.0767, flat against USD1.0765. Against the yen, the dollar was trading at JPY149.11, up compared to JPY148.01.

In the FTSE 100, DS Smith shares shot up 11%, while shares in Mondi were down 1.8%.

DS Smith said it has received a "highly preliminary expression of interest" from packaging industry peer Mondi about a possible merger, which would create a company worth more than GBP10 billion.

"The board of DS Smith understands that Mondi is considering a possible offer for DS Smith although no proposal has been received at this stage," DS Smith said.

It noted the put-up-or-shut-up deadline for Mondi under UK takeover rules will be March 7.

As far back as early 2021, Bloomberg had reported that Mondi was considering a tilt at DS Smith, citing at the time "people familiar with the matter". Nothing came of it at that time.

British American Tobacco shares surged 6.9% higher.

The London-based maker of cigarettes and vapes said revenue fell 1.3% to GBP27.28 billion in 2023 from GBP27.66 billion in 2022. The company swung to a pretax loss of GBP17.06 billion from a profit of GBP9.32 billion a year prior.

BAT declared a total dividend of 235.52 pence per share for 2023, up 2.0% from 230.9p a year prior.

Looking ahead, Chief Executive Tadeu Marroco said: "We are investing to strengthen our US business, accelerate innovation momentum, and enhance capabilities that support our strategic delivery. We expect these investments, together with the US macro-economic pressures, will impact 2024. Thereafter, we will progressively build to deliver 3-5% organic revenue, and mid-single digit adjusted organic profit from operations growth by 2026 on a constant currency basis. We are committed to continuing to reward shareholders with strong cash returns throughout this period."

Meanwhile, AstraZeneca was the worst performer on the index, falling 4.5%.

For 2023, the Cambridge, England-based pharmaceutical company's revenue rose to USD45.81 billion from USD44.35 billion and pretax profit more than doubled to USD6.90 billion from USD2.50 billion.

"Many investors view AstraZeneca as invincible given its success in recent years, yet its latest results showed that even the mighty can disappoint. The drugs giant missed fourth quarter earnings expectations due to more money being spent on research and development and a greater contribution from lower-margin sales in emerging markets. However, the business remains optimistic about the prospects for its cancer and rare disease drugs," AJ Bell analyst Russ Mould commented.

In the FTSE 250, Watches of Switzerland was 1.9% higher.

The Leicester, England-based watch retailer, whose key brands include Rolex, Cartier and Patek Phillipe said that in the 13 weeks to January 28, its financial third quarter, revenue fell 2.5% to GBP397 million from GBP407 million a year earlier.

Watches noted that "trading in the run-up to and beyond Christmas was tougher than originally expected, particularly in the UK amidst slower demand for luxury discretionary purchases".

The company added that trading conditions experienced in the third quarter of financial 2024 in the UK and US are expected to continue over the remainder of the fiscal year.

Amongst London's small-caps, Digital 9 shares toppled 16%.

Back in November, the investor had announced the sale of its stake in the Verne Group for up to USD575 million. The disposal of the data group to funds managed by Ardian France SA comprises USD440 million in cash, split between USD415 million payable on closure of the deal and deferred consideration of USD25 million.

On Thursday, Digital 9 said the Icelandic antitrust authority, the body responsible for providing the Icelandic regulatory approval, has decided to open a phase 2 investigation into the Verne transaction.

"Under the relevant applicable law, the period for the Phase II investigation is up to 90 working days which can be extended to 125 working days. The Icelandic anti-trust authority is not obliged to use the full period to conclude its review," Digital 9 said.

Stocks in New York were called lower. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite are all called down 0.2%.

Brent oil was quoted at USD79.94 a barrel at midday in London on Thursday, up from USD78.98 late Wednesday. Gold was quoted at USD2,029.99 an ounce, lower against USD2,039.13.

Still to come on Thursday's economic calendar, there is the weekly US initial jobless claims reading at 1330 GMT.

By Sophie Rose, Alliance News senior reporter

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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