Burberry shares rise to 14-month high after fresh tie-up rumours

OLD City bid rumours are just like fashion trends, they tend to re-emerge. Yesterday, fresh speculation about a possible Burberry-Coach tie-up pushed shares in the British trench coat maker to a 14-month high.

Online reports speculated that the US bag designer Coach was working with investment bank Evercore on a potential merger with Burberry to create a $20bn luxury fashion giant. Although Burberry declined to comment on the speculation, reports were talked down in afternoon trade. Citing sources familiar with the matter, Reuters said “no negotiations” are under way.

Luca Solca, of Exane BNP Paribas, described the potential tie-up as “a merger of problems”. “M&A history in luxury has shown that mergers don’t obviously help in regaining brand traction and desirability.” Contrary to Coach, most of Burberry’s efforts over the past 20 years have gone in the direction of “elevating the brand”, rather than “squarely into accessible luxury”, Mr Solca added.

It’s not the first time takeover talk has lifted shares in Burberry. Earlier this year, reports suggested the FTSE 100 group asked its advisers at Robey Warshaw to help prepare a defence for a possible takeover. At the time, French luxury house LVMH and Coach were named as possible suitors. Shares leapt by as much as 8.1pc yesterday, before closing up 45p, or 3pc, at £14.95.

Despite an afternoon rally in Burberry’s shares, the

FTSE 100 closed in the red, down 6.43 points, or 0.09pc, near a one-week high of 7,020.47. British American

Tobacco became the biggest laggard on the blue chip index after it

announced plans to buy the stake in Reynolds American that it does not already own in a $47bn cash and stock deal. Although analysts at Credit Suisse described the deal as “inevitable”, they said the timing was “a surprise” given current levels of indebtedness. Shares swung between gains and losses, before closing down 137p at £46.66. After the announcement, its peer Imperial Brands jumped 103.5p to £39.66.

Broadcaster ITV also lost its footing, finishing 2.2p lower at 171p, despite Liberum suggesting consensus advertising forecasts for 2017 look “too pessimistic”.

Meanwhile, slower growth in room rates in the third quarter caused shares in Holiday Inn owner Inter-Continental Hotels

Group to slide 65p to £31.60. On the other side, Royal

Bank of Scotland edged up 3.7p to 190p after Deutsche Bank and RBC both hiked its target price to 171p and 165p, respectively.

Elsewhere, a rating upgrade catapulted publishing and events company Informa towards the top of the FTSE 100, up 15p to 683p. Berenberg hiked its rating to “buy” and revised its target price upwards to 800p, citing an improvement in the company’s exhibitions business portfolio. Last month, Informa agreed to buy US group Penton to £1.18bn. Mid-cap gold miner

Acacia leapt 59.8p to 529p after it revised its full-year gold production coming in 5pc ahead of its previous forecast of 750,000 to 780,000 ounces. Finally, used car retailer

Motorpoint regained some momentum following this week’s profit warning, up 1.5p to 141p, after directors upped their stake in the business. Chief executive Mark Carpenter snapped up 520,000 shares and nonexecutive chairman Mark Morris bought 260,000 shares at 138p a piece.