Sainsbury’s closes in on Argos deal
SHARES in Home Retail soared last night as Sainsbury’s neared a deal to buy the owner of Argos.
The stock rose 16.2p, or nearly 12pc, to 152.9p on talk that the pair were close to agreeing a price of between 160p-165p for Home Retail, valuing it at up to £1.34bn.
Sainsbury’s needs to announce a firm intention to make an offer or walk away before the expiry of the Takeover Panel’s ‘put-up-or-shut-up’ deadline later today. It is understood the pair would try to agree a price before the deadline but may ask the panel for an extension to thrash out final details.
Sainsbury’s chief executive Mike Coupe moved to reassure investors such as the Qatar Investment Authority, which owns a quarter of the supermarket group, that he will not overpay for Home Retail.
But fund manager Schroders, which has a 20pc stake in Home Retail, has urged Sainsbury’s to table 165p per share, above the 150p that the supermarket chain was hoping to offer. A Sainsbury’s spokesman declined to comment.
Home Retail rejected Sainsbury’s initial approach in November last year, but has since agreed to sell its other main retail business, DIY chain Homebase, to Australian conglomerate Wesfarmers for £340m – paving the way for the sale of the rest of the group. Sainsbury’s shares shed 0.5p to 244.6p.
Elsewhere, speculation continued to circulate about more merger and acquisition activity in the drug industry following a string of deals including Shire’s swoop for blood disorder specialist Baxalta.
Rumours that several firms were interested in US liver disease drug group Intercept Pharmaceuticals were doing the rounds again following talk in December that Intercept had appointed JP Morgan to assess sev- eral approaches. This time, the chatter in the City was that Intercept could auction itself off amid purported interest from a plethora of majors including Shire, Gilead Sciences, Bristol-Myers Squibb and Pfizer.
Shares in UK-listed Shire, which has not ruled out further acquisitions but has pledged to focus on absorbing Baxalta for the moment, rose 12p to 3922p.
Meanwhile, traders were mulling vague speculation about a possible break-up of GlaxoSmithKline, either by the company itself or one or more bidders.
The theory went that the likes of Reckitt Benckiser (up 37p to 6271p), Procter & Gamble or Unilever (down 13.5p to 3071.5p) could snap up the company for its consumer health business and hive off the drug side to a more appropriate owner such as Switzerland’s Roche. Investors were unimpressed, trimming Glaxo’s shares by 4.5p to 1434.5p.
The FTSE 100 closed 23.69 points down at 6060.10 as commodity shares dropped after a disappointing Chinese manufacturing survey. The study showed activity in the sector shrinking at its fastest pace in almost three and a half years in January, fuelling fears about a global slowdown.
Miners were off, with Rio Tinto backtracking 18p to 1696p, commodity trader Glencore reversing 1.49p to 87.99p, Anglo American receding 3.4p to 274.05p and Antofagasta off 6.2p at 374p.
Investors in Rio failed to get any cheer from rating agency Standard & Poor’s, which said it may reduce its corporate issuer rating on the miner a notch after Rio reports earnings later this month. S&P said: ‘We believe commodity prices will remain very volatile while the impact of China’s slowdown plays out.’ On the other side of the Pond, the Dow
Jones Industrial Average got off to a bad start on the news from Beijing.
The price of a barrel of Brent Crude fell 5pc after the China data worsened worries about demand and an Opec source played down talk of an emergency meeting to stem the decline. But Netflix shares were up more than 3pc in early trading following market talk on social media that telecoms and media watchers at Morgan Stanley reckoned tech giant Apple could gobble up the online entertainment service.
Barclays was down 3.2p at 182.8p after a report that the bank was among potential bidders for broker TD Direct.
Elsewhere, Mozambique-focused titanium miner Kenmare Resources subsided 0.15p, or 23.4pc, to 0.5p after it blamed power interruptions and flood damage earlier in the year for a 19pc fall in ore production in 2015.
Mosman Oil & Gas leaked 1.18p, or nearly 50pc, to 1.2p as the New Zealand and Australia-focused oil explorer and developer said it had cancelled the planned acquisition of the South Taranaki Energy Project (Step) in New Zealand due to falling oil prices.
Mosman’s executive chairman John Barr said: ‘ After months of work by the board, staff and consultants on Step, it is extremely disappointing that the state of the global economy, and specifically the oil price, has led to this outcome.’ ÷ BP fell 9.15p to 366.95p yesterday as two City brokers cut their price targets on the stock ahead of fourth quarter results today. Deutsche Bank reduced its target to 445p from 450p on expectations of another dire quarter for oil producers due to weak crude prices. Exane BNP Paribas chipped in with a 3pc target cut to 330p.