AA shares motor ahead as takeover contest revs up
DEAL fever has been gripping City bankers of late and investors appeared keen to get in on the party today.
Shares in the AA rose 5p or 15% to 37.8p as the prospects of a drawn-out bid battle increased. The struggling motor insurance group last week said it had begun talks with a trio of bidders — Centerbridge Partners, TowerBrook Capital and Platinum and Warburg Pincus together.
At the weekend, first it emerged investment firm Apollo had joined the party, examining an offer, and then Drew Dickson, boss of the AA’s biggest shareholder Albert Bridge Capital, hit out at the board, labelling the takeover bids “very opportunistic”. Dickson claimed the company, which has £2.7 billion of debts, is overstating the scale of its problems.
Jefferies analyst Will Kirkness, who has a 5p target price on the stock, said: “The shares are likely reflecting the increased interest in the takeover. Bidders would likely be involved in a refinancing and perhaps taking a debt instrument. I do not understand why you would want to pay anything for the equity, given equity holders are behind the bondholders in the queue. The company has realised it needs a lot more capital than it thought and needs to get the bond price up, and announcing the talks has improved the yield.”
Troubled airline stocks were making gains despite wobbles over going abroad on holiday amid rising cases across Europe.
Analysts at Bank of America said flight movement data was improving — down 53% on last year last week, up from a -57% decline in the prior week. In response, British Airways owner IAG lifted 4% to 193p, Ryanair was up 2% at €11.72 and easyJet rose 3% to 592p. Another tarnished stock — cinemas operator Cineworld — was also on the up, increasing by 16% to 40.5p.
The bounce came as EY research showed travel and leisure stocks have seen record levels of profit warnings — 59 from 46 companies representing 79% of the sector — in the first six months of 2020.
Trading firm Plus 500 has had a stellar year as retail punters have tried to make gains from volatile markets. The company today said it is ramping up its sponsorship of football teams — its name is already emblazoned on shirts at Spain’s Atlético Madrid and Switzerland’s Young Boys – with a two-season deal with Poland’s national champions Legia Warsaw. Shares, up around 45% this year, rose 5p to 1261p.