Scottish Daily Mail

Takeover buzz over SABMiller

- By Jonathon Hopkins

AS another dose of Friday bid fever in the drugs sector gave the Footsie a boost, one broker took the opportunit­y to revisit takeover gossip for SABMiller, Britain’s biggest brewer.

Since first expressing its opinion three years ago that continenta­l brewer ABInbev should bid for the Peroni-to-Miller beer group, Canaccord Adams has seen that view become more widely held in the market.

Now it has reworked its analysis and concluded that the deal is still attractive and the rationale unchanged.

Canaccord believes that a two year window has now opened within which a deal could either be done, or shelved for good.

ABInbev has to decide in the next 12-18 months whether to extend its Pepsi franchises in Latin American for a further 10 years and doing so, Canaccord thinks, would all but rule out a deal for SABMiller.

Conversely, the broker believes that if the Budweiser to Becks brewer decides not to extend that Pepsi deal, then it could simultaneo­usly make a bid for the UK blue chip firm.

Canaccord said it ascribes a 25pc likelihood to a bid for SABMiller at 4200p a share within two years and as a result it has raised its target price for the UK stock to 3800p from 3000p. Given the 12pc potential upside in SABMiller shares to reach that target, Canaccord has upgraded its rating for the stock to buy from hold, but the stock fell up 2p to 3393p. The broker said SABMiller’s best defence against a bid would be a strong share price which should be ‘good news for shareholde­rs’.

The main takeover excitement, however, was for drug maker Shire which surged 633p higher to 4371p after confirming it had spurned a £27bn bid from US-based rival AbbVie. AbbVie’s pursuit of Shire came in May at the same time as blue chip peer AstraZenec­a was itself fighting off a £69bn takeover offer from US drugs giant Pfizer, which like AbbVie saw three bid approaches rejected.

As bid fever swept the sector once again, AstraZenec­a shares added 26p to 4470p, while pharma peer GlaxoSmith­Kline gained 1.5p at 1591.5p. And medical devices maker Smith & Nephew, which has also been at the centre of US takeover speculatio­n in recent months took on 14p at 1079p.

The merger and acquisitio­n activity boost saw the FTSE 100 index close 17.09 points higher at 6825.20, extending a recent rally as other global markets moved ahead. The FTSE 250 index ended 107.54 points stronger at 15,791.42. Blue chip gains were limited, however, as investors kept a close watch on the situation in Iraq after US President Barack Obama sent 300 military advisers to help Iraq’s government in its fight against Sunni militants.

Oil prices remained strong as the Islamistle­d rebels surrounded a key oil refinery in northern Iraq, with Brent crude notching up its second weekly gain amid supply concerns surroundin­g the second biggest OPEC oil producer.

Commodity issues provided another prop for the Footsie led by precious metal producers, with Fresnillo up 12p to 847p and Randgold Resources ahead 78p at 4812p after gold prices held near two month highs with the Iraq situation.

The other focus in London was on the banking sector after conditiona­l dealings began in

TSB following the successful sale of a 35pc stake in the revived lender by parent Lloyds

Banking Group. TSB closed at 290p. Part-government owned Lloyds saw its shares slip 0.7p to 76.7p, while majority taxpayer-owned peer Royal Bank of Scotland was off 1.3p at 337.2p RBS is looking to flog off its reactivate­d Williams & Glyn business in the future. Away from the big boys, high street photo booths operator Photo-Me Internatio­nal was in demand, adding 16.75p to 143.25p as investors welcomed its recent appointmen­t of Liberum Capital as joint corporate broker alongside finnCap.

Among resources plays, Alecto Minerals was a good gainer, up more than 9pc, or 0.08p, to 0.9p after the group unveiled a 28pc increase in the gold resources on the Gourbassi area of its Kossanto Gold Project in Mali in West Africa.

But on the downside, iron ore producer Bellzone Mining shed more than 12pc, down 0.37p to 2.58p, after saying it was in dispute with a barge operator in West Africa, although it said it had not affected production.

Bellzone said its Forecariah joint venture in Guinea, which has delivered 268,000 tonnes of ore so far in 2014 and has 68,000 tonnes ready for shipping, was in dispute with an operator at the port of Konta about safety issues, efficiency of operations and charges raised by the shipper.

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