Stocks in London were mixed around midday on Thursday, although a burst of takeover action provided some energy to a quiet trading day due to a public holiday in New York.
Renewi said it would be minded to accept a bid from Macquarie, which came back to the negotiating table after walking away more than a year ago. Direct Line rebuffed an Aviva tilt, however. Loungers agreed to a private equity bid, while a report suggests the takeover of the Royal Mail owner is closer.
The FTSE 100 index added 5.24 points, 0.1%, at 8,279.99. The FTSE 250 rose 129.27 points, 0.6%, at 20,730.90, and the AIM All-Share slipped just 0.15 of a point at 731.25.
The Cboe UK 100 was up slightly at 832.06, the Cboe UK 250 added 0.8% at 18,232.17, and the Cboe Small Companies rose 0.2% at 15,721.33.
The CAC 40 in Paris and the DAX 40 in Frankfurt each rose 0.5%.
Direct Line shares jumped 42%, while Aviva faded 3.1%. 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 £3.26 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 sector peer Admiral shot up 2.9%.
‘It’s normal to see other companies in the same sector jump when there is takeover activity as investors consider who else might be bid targets or are trading too cheaply. There is no suggestion that someone will bid for Admiral but that hasn’t stopped it having its moment in the sun,’ AJ Bell analyst Dan Coatsworth commented.
‘Royal Mail’s owner International Distributions Services is already in a takeover situation and there are reports the sale is close to being finalised. Daniel Kretinsky’s EP Group has made a series of promises to keep part of Royal Mail going as before, including on elements of pricing and branding. Longer-term, it’s likely that the Czech billionaire will change the way the business is run, as the current set-up is riddled with flaws. It needs to be run more efficiently and that will require big changes. For now, it feels like he’s offering enough guarantees to reassure the government that he’s a responsible owner for one of the UK’s most iconic businesses.’
The sale of International Distribution Services to EP Group could be confirmed in the next two weeks, the BBC reported on Thursday.
According to BBC sources, Kretinsky has agreed to make extra concessions in order to clinch the takeover.
Unions have been meeting with Kretinsky’s advisors this week, and while some sources say they remain ‘wary’ of him, the Communication Workers Union said meetings with the EP Group have been ‘constructive’, the report noted.
The deal will still have to be approved under the National Security and Investment Act although officials carried out a similar review when he increased his stake in the company, the BBC said.
International Distributions Services added 1.3%.
Renewi said it would recommend a new takeover proposal worth over £700 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 £700.9 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.
Macquarie Asset Management, part of Sydney-listed Macquarie Group, said the final possible offer of 870 pence per share follows several approaches to Renewi and the announcement comes ‘in response to press speculation’.
Renewi shares spiked 45% to 801.00 pence, giving it a market capitalisation of £666.6 million.
Finally, Loungers shot up 28% to 304.80p, for a market value of £309.8 million.
It backed a roughly £340 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 £338.3 million equity value and a £350.5 million enterprise value. It is a 30% premium to the 238p closing price on Wednesday.
The pound was quoted at $1.2664 early Thursday afternoon, down from $1.2687 at the time of the London equities close on Wednesday. The euro faded to $1.0546 from $1.0579. Against the yen, the dollar rose to JP¥151.86 from JP¥150.71.
Still to come on Thursday’s economic diary is a German inflation reading, the headline economic release of the afternoon. Thursday would usually see US initial jobless claims data released, though that came out a day earlier than usual due to the Thanksgiving holiday.
Markets in New York re-open on Friday for an abbreviated session.
Pepperstone analyst Michael Brown commented: ‘I’d strongly suggest that today is a good day for putting one’s feet up, and indulging in a chosen pastime, given the thin conditions that are likely to prevail, and the barren economic data docket.
‘Said conditions are likely to persist into Friday as well, with most US participants enjoying their long weekends to the fullest, meaning subdued trade is likely into the weekend, barring any potential unexpected news flow.’
Back in London, FTSE 250-listed Dr Martens jumped 12%, a share price jump only topped by M&A-driven gains at fellow mid-caps Renewi and Direct Line.
Dr Martens said results for the half-year that ended September 29 were in line with its expectations. Revenue declined 18% on £324.6 million from £395.8 million, with the bottom line sinking to a pretax loss of £28.7 million from a profit of £25.8 million.
However, revenue was modestly above the consensus of £316 million, while a loss of £28 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.’
Tullow Oil fell 9.7%. The Africa-focused oil & gas exploration and production company expects 2024 group production of 62,000 barrels of oil equivalent per day. In the year-to-date production has averaged around this level, 62,000 boepd, in line with guidance, Tullow said.
This was consistent with comments made in August that full year production is expected to be at the lower end of the 62,000 to 68,000 boepd range, similar to 62,700 boepd recorded in 2023.
But free cash flow is expected to be $150 million to $200 million, below previous guidance of $200 million to $300 million due to timing of payments, namely the incremental Jubilee lifting now expected in early January 2025 and overdue gas payments from the government of Ghana.
In 2023, free cash flow was $170 million.
Brent oil was quoted at $72.85 a barrel midday Thursday, edging up from $72.79 at the time of the London equities close on Wednesday. Gold rose to $2,646.73 an ounce from $2,643.13.
The ministerial meeting of the Opec+ alliance initially scheduled for Sunday has been pushed back to December 5, the Vienna-based Organization of the Petroleum Exporting Countries said.
The meeting of the 22-member Opec+ group led by Saudi Arabia and Russia has ‘been rescheduled to... 5 December 2024, as several Ministers will be attending the 45th Gulf Summit in Kuwait City,’ their statement said on Thursday.
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