US fund ploughs money into AO
ONLINE white goods retailer AO World, which sells everything from washing machines and fridges to ovens and vacuum cleaners, has a fan in New York.
The shares jumped to 181p before closing 6.9p higher at 169.9p on hearing that Big Apple fund manager Ruane, Cunniff & Goldfarb has taken a 5.4pc stake in the Bolton-based business.
The firm’s flagship Sequoia Fund has one of the best long-term track records on Wall Street since its inception in 1970 and has in the past acquired stakes in other UK companies, including Rolls-Royce.
Down more than 40pc from February 2014’s ‘punchy’ flotation price of 285p, which valued the company at £1.2bn, AO World could now be considered a viable takeover target.
Other major AO World shareholders include Odey Asset Management, which sits on 6.6pc of the equity. Hedge fund tycoon Crispin Odey, who runs OAM, has in the past been highly critical of the stock’s performance, at one stage describing the flotation as ‘arrogant and overhyped’ after seeing the stock crash from 285p to 125p in August.
AO World last month revealed it swung to an interim loss of £8.9m, despite posting a sharp 21.7pc increase in first-half revenue to £264.3m.
The rise in revenue was driven by a strong performance in the group’s UK division, which saw revenue grow 14.5pc year-on-year, compared with the 6.5pc growth it reported in the three months to end-June.
Any predator interested in possibly bidding for AO World would have to get agreement from founder and chief executive John Roberts, who owns 26.2pc of the equity.
Roberts is already worth an arm and a leg after trousering £86m from selling shares ahead of the flotation.
Argos-to-Homebase owner Home Retail rose 4p to 110.4p on a combination of vague takeover talk and hopes for a bumper Christmas trading period.
Professional punters sniffed around following a weekend press report that French DIY tycoon Leroy Merlin could be interested in making an offer. Cash-rich private equity groups are also believed to be keeping a close eye on how the group performs over the Christmas period before making a decision on whether to bid or not.
Tumbling oil prices – Brent fell to a near-seven-year low after Opec failed to agree on Friday to cut output and without reference to an output ceiling – dragged oil stocks sharply lower on both sides of the Pond.
Wall Street lost 170 points in early trading which caused the Footsie to give back an initial gain of 45 points to close 14.77 points off at 6,223.52.
Heavyweights Royal Dutch Shell lost 73p to 1526.5p, BG Group 41.9p to 983.1p and BP 12.1p to 347.6p, while Premier Oil lost 11pc or 7.25p to 57.75p and Tullow 8.44pc or 15.9p to 172.4p.
Ahead of the crucial Christmas trading period, buyers chased Associated British Foods up to 3588p before the stock closed 65p better at 3550p. Primark, its mega-successful discount clothing group, opened its first store in the US in Downtown Crossing, Boston, in September. Investment property company CLS Holdings jumped 76p to 1742p in response to a Panmure Gordon buy note and increase in target price to 2610p from 2140p. Analyst Sue Munden says it continues to deliver excellent returns to shareholders. It is a solid cash-generating business which looks to be considerably undervalued against peers. Shares of Peppa Pig group Entertainment
One were dumped in the trough and ended 31.4p or 15pc down at 176.4p. Broker N+1 Singer advised clients to sell as the £285m refinancing package announced yesterday will impact 2017 and 2018 earnings per share by 8.6pc.
Penny share punters were all over Kenmare Resources, 0.14p or 33pc higher at 0.58p, on hearing that the State General Reserve Fund from Oman has approved in principal an investment of around £66m conditional of the raising of a further £50m of capital. Iluka Resources, which first proposed a combination of the two companies in June last year, has withdrawn its offer for Kenmare.
InternetQ, which was nervously sold down to an all-time low of 44p last week after shareprophets.com, a popular investment website, raised serious questions about its revenue model and finances, rallied 12p, or 19.4pc, to 74p. Many bears closed their positions after the company issued a detailed response to the blog’s allegations. It said it will review the allegations and claimed there were factual inaccuracies in the original blog.
Leni Gas & Oil, or LGO, the onshore oil production and development company, slumped 47pc to 0.22p after putting itself up for sale as part of a formal strategic review of the company’s business and assets with a view to considering all options to maximise shareholder value. SCRAPPY selling dragged miniature figures and games manufacturer Games Workshop 8.75p lower to 596p after it warned the strength of sterling is expected to have a negative impact on sales, which are forecast to fall slightly in the six-month period to the end of November. However, the company said that trading in the first half was largely in line with expectations.