Takeover talk pumps up Weir
INVESTORS drilled into oil services and engineering companies as low crude prices and the plunging pound fuelled takeover talk.
Shares in Weir Group and Hunting were both up on market gossip about potential interest from rivals – with Weir being talked of as a possible target for US giant Flowserve.
Texas-based Flowserve has shown interest in Weir in the past. It made an unsolicited approach to buy the company for $978million in February 1999, but Weir rejected it and Flowserve later pulled out.
Stocks in the sector have dropped sharply since late 2014 as the price of a barrel of Brent crude has fallen from more than $100 to around $36.
Oil services groups, which supply drilling kit and other equipment and services to producers such as BP, Shell and Total, have taken a hit as customers have slashed jobs and investment in new projects.
Earlier this week, Weir revealed a 24pc drop in annual orders, a 22pc fall in revenue and a 47pc decline in pre-tax profits, and warned that profits were likely to dip further in 2016.
Barclays said investor scrutiny of Weir’s balance sheet was expected to increase and it was facing increasingly tough markets, not least in North America, although it was still the broker’s preferred stock in the sector.
Takeovers in the industry ‘would not be surprising’ given the depreciation of sterling versus the dollar, Barclays oil and gas analyst Lars Brorson said.
The pound has dropped more than 3pc since the end of last week on fears of a possible UK exit from the EU.
Shares in Weir closed 52.5p, or nearly 6pc, ahead at 933p and Hunting spurted 37p, or more than 12pc, to close at 340.75p.
Rivals also rallied, with Petrofac gaining 67p, or 8.25pc, to 879.5p, Wood Group climb- ing 12p to 620p and Amec Foster Wheeler 24.3p, or 7.22pc, slicker at 360.9p.
The FTSE 100 Index closed 83.2 points ahead at 6096.01, boosted by a rally in commodities stocks and hopes of a profit recovery in Pearson, even though Royal Bank of Scotland reported its eighth full-year loss in a row. RBS shares backtracked 17.4p, or 7.1pc, to 226.6p.
In New York, however, the Dow Jones Industrial Average was down by 55.64 points at 16,641.65 by late in the trading day.
Education publisher Pearson put on 34.5p to close at 836p after posting results in line with analysts’ expectations, increasing its dividend and saying its restructuring should lead to profit at or above £800million in 2018. Mining stocks also rose, with Glencore, BHP Billiton and Rio Tinto all up between about 3pc and 8pc after the price of copper firmed on Friday, with the focus shifting to a G20 meeting in Shanghai.
China is seeking to restore confidence in its giant, metal-hungry economy, but Germany all but ruled out any coordinated moneyprinting to counter a deepening global chill.
Sportswear retailer Sports Direct dropped 2p to 397.4p after saying that it was facing higher borrowing costs because it had decided to stop using a credit line provided at favourable rates by billionaire founder Mike Ashley.
Punters reduced stakes in William Hill by 3.7p to 398p as the bookie’s profits wilted under the weight of extra gambling taxes last year, although it still announced a £200m share buy-back.
Imagination Technologies sparked 13.25p, or 8.5pc, to 168.25p on continued merger and acquisitions gossip following news earlier this month of the departure of its chief executive and the sale of digital radio arm Pure.
Shares in Armour Group were suspended at 3.25p as the technology investor unveiled a £15.3million reverse takeover of US mobile point- of- sale software supplier OneView Commerce. Elsewhere, Amara Mining firmed 1.2p to 10.25p after saying that a study had shown it could reduce the costs of its Yaoure gold project in Côte d’Ivoire by more than £72million.
Patagonia Gold rose 0.25p to 2.5p after saying it was to develop a heap leach project at its Cap-Oeste mine, with initial production pencilled in for the third quarter of this year.
MX Oil slipped 0.02p to 1.22p as the company agreed terms for the sale of its investment in the Aje Field off the coast of Nigeria to GEC Petroleum Development Company.
Auhua Clean Energy pared earlier losses to stand 0.05p up at 0.5p after saying trading in its shares will be suspended from Monday because it had not yet appointed a replacement nominated adviser for Grant Thornton, which has quit the role, although it is still in talks to do so.
LUXURY fashion house Burberry was in vogue after Nomura upgraded its rating on the stock to ‘buy’. Expectations of a shakeup at the company, which has faced pressure from the Chinese economic slowdown, had risen after it announced a review of the global market and its business, the Japanese broker said. ‘We see potential for a greater valuation if Burberry can successfully drive productivity measures, while being more disciplined on cost and capital allocation,’ Nomura said. Shares rose 89p, or 7.54pc, to 1269p.