Investor Guoco makes mandatory cash bid for Rank as FTSE regains ground
Hong Kong investment group Guoco has announced a £585m cash offer for bingo and casino operator Rank, but it does not want the bid to succeed.
Under takeover rules Guoco had to make the offer after buying an 11.6% stake in Rank from Malaysian casino group Genting when it came up for sale. The deal took Guoco's shareholding to 40.8%, above the 29.9% threshold where it had to make a bid. But the offer will not be raised and is expected to be open for only 21 days. Guoco's aim is to keep Rank's listing and a spokesman said: "Guoco remains very supportive of the company and its management team. This is not a hostile move."
Guoco first invested in Rank in 2007 at 80p a share. Rank shares closed up 1.9p at 148.8p ahead of the release of the Guoco announcement.
Overall the market managed an unlikely revival after an early fall. Better than expected US employment figures helped offset another volatile day for commodity prices, especially oil, gold and silver. The non-farm payrolls for April showed that an additional 244,000 jobs were created, much higher than the 185,000 expected by analysts. So having fallen as low as 5871, the FTSE 100 finished 56.79 points higher at 5976.77, helped by a rise of nearly 170 points on Wall Street by the time London closed.
Royal Bank of Scotland rose 2.26p to 42.74p, the best performer in the leading index after its first quarter figure showed an increase in core profits, while results from insurer Admiral were also well received, and it added 35p to £16.97.
Meanwhile ITV, which has been a weak market of late on concerns about a downturn in advertising spending, recovered 3.5p to 75.6p after analysts at JP Morgan said the fall had been overdone. They said:
We believe ITV's current share price has already factored in the worse than expected second quarter, having slipped by 7.6% over the last month. The release of first quarter revenues [next week] may be an opportunity to buy the stock as we believe the worse than expected second quarter revenues for European free TV are not the sign of a structural change in the advertising recovery, but a blip.
SABMiller added 37.5p to 2247.5p as Citigroup said it was unlikely the brewer would bid for Australian group Foster's, as has been suggested. Citi analyst Adam Spielmen said:
There has been lots of speculation that SAB may buy Foster's. From May 20, Foster's will be a pure play brewer, without wine exposure. But we don't think that either SAB or anyone else is likely to bid, unless Foster's price falls materially first. The returns would not stack up ...and this looks a bad time to buy, with the Australian dollar trading at a 20-50% premium to historical averages.
With oil up on the day but still well below its recent peak, Royal Dutch Shell A shares fell 11.5p to £22.24. But falling fuel prices benefited transport companies, with International Airlines Group up 8.1p to 254.1p, additionally helped by better than expected quarterly figures. Easyjet climbed 12.2p to 355.1p and even Flybe, hit hard by a profit warning this week, recovered 1.5p to 174p. Cruise specialist Carnival added 50p to £26 and Tui Travel ended 2.9p ahead at 244.8p.
Among the mid-caps Rentokil Initial rose 3.2p to 94.25p despite its struggling parcels business City Link continuing to hold back progress. The company said overall first quarter revenues rose 0.7%, but City Link fell by 13.4%. Its poor performance was expected to continue in the second quarter before seeing an improvement later in the year.
Cable & Wireless Worldwide added 2.91p to 49.74p on talk of possible predatory interest from the likes of Vodafone, down 1.65p at 167.6p, or AT&T. Micro Focus International climbed 8.8p to 372.8p ahead of a trading update next week, with investors awaiting bid developments. Bain Capital is thought to be one party interested in the software group.
Elsewhere investors in Helphire, the accident claim specialist, faced a bit of a car crash. The company's shares lost nearly two-thirds of their value after its second profit warning in less than a year and news of an accounting problem.
The company, which supplies vehicles to motorists involved in accidents while their own cars are replaced, said its profits for the year would be significantly below expectations. Total claims in the UK fell by 8% in 2010 and Helphire believed this trend had continued into the first quarter. It said high petrol prices had led to fewer car journeys and therefore fewer accidents, as well as shorter hire periods as vehicles were repaired more quickly.
As if that were not bad enough, it has discovered it may have overstated the amount owed by its insurance company debtors by around £25m. It has called in KPMG to investigate what happened and exactly how big the problem is. It has also told its bankers, but said the problem does not affect the settlement of claims or its cash position.
But investors do not like "accounting problems" and Helphire's shares plunged 7.84p to 4.91p. Danielle James at Shore Capital issued a sell note, saying:
With consensus estimates currently forecasting adjusted pretax profit for the group of £12.3m for 2011, the write off of this [£25m] debt would cause...a material loss for the period. Ignoring the accounting impact, the error, to us raises serious questions over Helphire's revenue recognition policies, the integrity of operating systems and the quality of oversight being exercised by the management team.
Victoria Oil and Gas jumped 1.06p to 5.6p after the exploration group was granted a licence by the Cameroon government allowing it to develop the Logbaba gas field. Analysts at Fox-Davies Capital said:
It has been a frustrating long wait for the award of the exploitation licence, but it is finally in hand and the company can now proceed with the construction of the gas pipeline. The management have previously indicated that it will take approximately five months from the receipt of the licence to first gas; therefore, gas sales should commence in the fourth quarter.
HMV slid 0.25p to 10p on worries about its current trading. Nick Bubb at Arden said:
Every morning we sit eagerly at our desks at 7am watching for an HMV trading update to pop up on the screen and…nothing has happened. But HMV will have to come clean eventually on how bad April was, and we discovered one clue in the Morrison's first quarter conference call, of all things, yesterday.
Asked about non-food trading, the [Morrison's] chief executive Dalton Phillips said that they're pleased to be much less involved in non-food than their rivals, so that they can "cherry-pick" and "have a bit of fun" and he quoted the example of how Morrison's had doubled their normal market share on the latest Harry Potter DVD release last month with a punchy £6 promotion…We recall HMV whining this time last year about predatory supermarket pricing on new chart releases and it doesn't sound like conditions have improved.