Buyout looming for Home Retail
SHARES in Home Retail were flying yesterday amid market rumours that Sainsbury’s was closing in on its planned takeover of the Argos owner.
The stock gained 7.5p to 144.7p as talk circulated that advisers from the two companies were set to spend the weekend locked in talks to thrash out a deal.
Representatives of the two sides were said to be hoping to sign off an agreement in the early part of next week, ahead of the Takeover Panel’s ‘put up or shut up’ deadline of February 2.
Talks are thought to have taken on added urgency amid market chatter that rival supermarket chain Asda, owned by US giant Walmart, was also eyeing Home Retail.
The speculation follows Home Retail’s rejection of Sainsbury’s initial approach in November. It also comes in the wake of Home Retail’s announcement on Monday that it had agreed to sell DIY chain Homebase, which Sainsbury’s formerly owned, to Australian conglomerate Wesfarmers for £340m.
Under the terms of the deal, Homebase would become part of Wesfarmers subsidiary Bunnings while Home Retail would return about £200m of the proceeds to shareholders.
Sainsbury’s, which already has Argos offshoots in some of its shops, is interested in buying the catalogue retailer to boost its presence in the online arena and fend off competition from pure internet players such as Amazon.
Sainsbury’s (up 2.5p to 233.6p) and Home Retail declined to comment.
Meanwhile, the FTSE 100 Index notched up its first weekly gain of 2016 as a bounceback in oil prices lifted shares in energy groups.
The price of a barrel of Brent Crude increased 7.2pc to $31.5 while US light crude put on 6.8pc to $31.7.
The Footsie rose 126.22 points to 5900.01, also aided by hints from European Central Bank president Mario Draghi about another potential round of stimulus for the eurozone economy.
Back in the markets, National Grid sparked 16.5p to 941.9p after whispers on Thursday that the UK’s largest listed utility was planning a swoop for US investorowned utility Empire District Electric Company (EDEC).
Word was that National Grid was among three groups interested in buying EDEC, which supplies electricity, natural gas and water to 215,000 customers on the other side of the Pond.
Shire was among the biggest winners in the UK drug industry, up 102p at 4228p, as rumours persisted that the rare disease specialist was still eyeing acquisitions despite its megatakeover of US blood disorder treatment developer Baxalta. Chief executive Flemming Ornskov has said the company is focused on absorbing Baxalta into the group, although he did not rule out attractive smaller bolton deals.
Market conspiracy theorists reckon now is a good time for potential bidders to make their move because share prices of firms such as US osteoporosis specialist Radius Health – one of the firms talked about as a potential target – have fallen in the last month or so.
Elsewhere Tullow Oil topped the FTSE 250 Index with an 18.6p, or nearly 14.4pc, gain to 147.8p as the oil group with operations in Africa and elsewhere showed its confidence in the industry’s longterm prospects by sending a huge floating oil production platform to Ghana.
Bigger oil companies were also doing well on the back of the recovery in the oil price, with Royal Dutch Shell advancing 69.5p to 1388p, BP gushing 10.45p to 352.7p and BG Group rising 47.5p to 980.2p.
Education publisher Pearson, however, reversed 14.5p to 757.5p as the former owner of the Financial Times dropped back after strong gains on Thursday on a reassuring trading statement. Investors took a breather from plumping up online retailer Ocado following rumours earlier in the week that US online giant Amazon was mulling a bid. Shares eased 6.1p to 275.8p.
Mexico and Africafocused MX Oil retraced 0.02p, or 4pc, to 0.6p after saying on Thursday that it needed £2m to invest in a project in Nigeria and was completing a conditional placing at a targeted price range of between 0.5p and 1p per new ordinary share.
Aureus Mining also dimmed 1.5p, or 28pc, to 3.88p as the West African gold producer said operational issues at its mine in Liberia had resulted in reduced gold sales.
But another miner of the yellow metal, Condor Gold, gleamed 4.25p to 24.25p after a study showed a significant increase in the potential viability of its La India gold project in Nicaragua.
Emerging marketfocused mobile internet services supplier Mobile Streams ticked up more than a quarter, or 1.38p, to 6.62p after winning contracts in India despite challenges in Argentina.
÷ FALLING commodity prices sparked fears of a possible fund-raising at BHP Billiton yesterday despite a boost to sentiment. Analysts at Liberum Capital said BHP (up 6.1p to 648.9p) may have to launch a rights issue to shore up its finances, adding that investment reductions and a possible dividend cut were unlikely to help the miner keep its credit rating. Last week BHP wrote down its US shale oil assets by $7.2bn.