Disappointment as M&S fundraising falls short
MARKS & Spencer received a lukewarm response to its £600m cash call as investors stayed away.
The High Street stalwart is raising money to buy a stake in online grocer Ocado, as it seeks to turn around its fortunes following a prolonged share slump.
But just 85pc of investors took up an offer to snap up extra shares in a rights issue – even though shares were offered at a hefty discount of 185p each, 14pc less than they are presently worth on the open market.
It meant underwriters Morgan Stanley, BNP Paribas, HSBC and Shore Capital had to step in and find buyers for the remaining 15pc of shares, which were sold for 211p each. That didn’t do much to cheer investors, with M&S shares tumbling 1.5pc, or 3.2p, to 216p.
The Ocado (up 0.3pc, or 4p, to 1171p) deal has proved controversial because analysts and shareholders think M&S is overpaying.
The grocer – a late arrival to the online shopping game – has agreed to fork out a hefty £750m for half of Ocado’s UK retail business, and used the rights issue to raise some of these funds. It is a big bet by chief executive Steve Rowe and chairman Archie Norman, who are hoping the move will revitalise M&S – no easy task after profits fell 10pc to £523m for the year to March.
But there was better news at ‘big four’ grocer Morrisons. The firm is rolling out same-day deliveries to another five British cities with the help of Amazon – usually the retail industry’s bogeyman.
The unlikely partnership, which until now has only covered Leeds, Manchester, Birmingham and parts of London, is coming to Glasgow, Newcastle, Liverpool, Sheffield and Portsmouth, with further locations expected in future. It means customers can order their shopping online, with the items then picked up from a local store and delivered by Amazon.
In some locations, customers can receive deliveries within one hour of the order being placed.
David Potts, the supermarket’s chief executive, said: ‘Morrisons’ conveniently located local supermarkets and Amazon’s very popular website are an ideal combination, offering same- day grocery home delivery for customers in and around cities across Britain.’
The expanded tie-up helped lift shares yesterday by 2.2pc, or 4.2p, to 199.45p.
The internet shopping boom is also a gift that keeps on giving for
DS Smith. Shares in the package maker surged 5.1pc, or 17.6p, higher to 360.8p as it revealed a 35pc rise in annual profits, to £350m.
That was after sales rose 12pc to £6.2bn for the year to April 30, fuelled by strong demand for the corrugated cardboard boxes that the likes of Amazon use to deliver items to legions of shoppers. DS Smith said sales of packaging for ‘fast moving goods’ such as food and drink and were also strong.
Plumbing group Ferguson was given a lift when it emerged veteran activist investor Nelson Peltz has bought a 6pc stake in the company worth around £736m.
The billionaire’s hedge fund, Trian, said the firm was ‘an attractive business that trades at a discount to comparable US peers’ as it snapped up the holding’.
Ferguson makes 90pc of its profits in the US, but has recently struggled in the UK amid difficult trading conditions. In the past year its shares have performed poorly, but the Trian deal saw them rise 5.9pc, or 312p, to 5622p.
There was plenty of cheer around for life insurance provider Just
Group as well, which soared 12.7pc, or 6.4p, higher to 56.85p off the back of an announcement from chairman Chris GibsonSmith that he would consider all options in a bid to boost returns.
Despite an eventful day for the Conservative leadership election, the FTSE 100 closed virtually flat at 7368.57.