News Column

UK MIDDAY BRIEFING: BSkyB Confirms Talks To Buy Sky Italia, Deutschland

May 12, 2014



LONDON (Alliance News) -British Sky Broadcasting confirmed Monday that it is working on the potential acquisition of 21st Century Fox's interests in Sky Deutschland and Sky Italia.



Bloomberg, citing people familiar with the matter, reported that talks about the potential EUR10 billion deal had been taking place for some time, although BSkyB said the talks remain at a preliminary stage.



BSkyB's shares are down on the news. Berenberg analyst Sarah Simon said that, with limited synergies among the UK, German and Italian businesses, any transaction would, at least in the medium term, be very dilutive to BSkyB's earnings per share.



US drugmaker Pfizer is continued its campaign to buy AstraZeneca, submitting a statement to the UK House of Commons ahead of a committee hearing Tuesday, saying a combination of the two businesses would "unquestionably create a UK-based scientific powerhouse that would deliver great benefits to the United Kingdom and to patients and science globally".



Pfizer confirmed plans to re-domicile the combined business in the UK, establishing 20% of the combined its research and development workforce in the UK, and complete AstraZeneca's R&D centre in Cambridge. It also said it would retain "substantial" manufacturing facilities at Macclesfield.



"Though we had no obligation to make these commitments we were willing to do so...because we support the opportunity to strengthen the UK life sciences industry," Pfizer said in its statement.



AstraZeneca, meanwhile, joined Amgen in saying that a Phase 3 study evaluating brodalumab in patients with moderate-to-severe plaque psoriasis met all primary and secondary endpoints for both doses that were evaluated.



There was more deal-making in the sector Monday, as Shire agreed to buy Lumena Pharmaceuticals Inc for an upfront cash payment of USD260 million plus milestone payments related to ongoing drug trials.



Shire will acquire two potential liver disease treatments that Lumena is developing.



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FTSE 100: up 0.4% at 6,840.19

FTSE 250: up 0.5% at 15,960.34

AIM ALL-SHARE: down 0.03% at 806.04

GBP-USD: up at 1.6885

EUR-USD: up at 1.3766

GOLD: up at USD1,296.17 an ounce

OIL (Brent): up at USD108.65 a barrel

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Key UK Corporate News



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FTSE 100: BP, Niko Resources and Reliance Industries have issued a notice of arbitration to the Indian government over gas prices. The firms won approval in 2013 to nearly double their prices at the Indian natural gas field KG-D6, which they jointly operate, but the companies continued to see delays by the government in putting the changes in place. Capita expressed confidence Monday in meeting market expectations for 2014, as it saw a strong start to 2014, with GBP1.1 billion in new sales wins.



FTSE 250: Polymetal International has completed a reserves and resources audit for the Svetloye Gold Deposit, while its pre-feasibility study showed it could produce up to 70,000 ounces of gold at the mine a year. Just Retirement has unveiled a reorganisation to cut costs as it grapples with the fall in demand for individual annuities since government plans were unveiled in March to give people in the UK more freedom over how they invest their pension pots. It said its reorganisation will produce annual cost savings of GBP14.0 million in its next financial year, but will result in "one-off costs" of GBP5.0 million in the current one. Interserve subsidiary Landmarc Support Services has won a GBP322 million contract with the Ministry of Defence to manage the MoD National Training Estate Prime contract. The contract has an initial five year term with an option to extend for up to a further five years. Dignity is currently assuming there will be about 2% fewer deaths in 2014 than in 2013, after deaths were down 7.5% on the year in the first quarter.Inmarsat says it has proposed a free global airline tracking service to the International Civil Aviation Organisation, following the loss of Malaysia Airline's flight MH370. UBM has acquired construction tradeshow Expo CIHAC from a Mexican construction industry trade association. It didn't say how much for. Carillion and Babcock International Group have been selected as preferred bidders by Network Rail for its GBP25 billion investment programme to upgrade the UK's ageing railway lines. Carillion's contract is worth about GBP100 million and Babcock's is worth about GBP200 million, both over five years. Lonmin said it swung to a significant pretax loss in its first half as the ongoing miners strike in South Africa continued to hit production at the company. However, a leaked memo seen by Reuters over the weekend showed that the company is expecting a mass return to work on Wednesday.



AIM All-Share: Bahamas Petroleum is doing well after it said its pretax loss narrowed in 2013 as a result of a range of lower expenses. Employee benefit expenses were down 17%, depreciation expenses down 44% and other expenses were down 16%. Leni Gas & Oil is another gainer after it further increased the size of its GY-664 well find in Trinidad and that it has now sold a total of over 100,000 barrels of Goudron oil since taking over operations in the region in October 2012. Conygar Investment Company is up after selling its 9.6 acre development site at Haverfordwest, Pembrokeshire to J Sainsbury in a GBP13.8 million deal. Blur Group is a big faller after it said that revenues from a project with a value of around USD3.6 million will now be delayed into 2014, leading it to reduce its revenue estimate for 2013 for a second time. It now expects 2013 revenues in the region of USD4.8 million, a further 10% reduction from the numbers that were already almost cut in half less than a month ago. BrainJuicer is also down after it warned it expects to post a much higher share-based payment charge for 2014 due to a sharp rise in its share price during 2013 and early 2014. Wessex Exploration is down after it signed Heads of Agreement to acquire Hague and London Oil BV by issuing 241 million shares in the company, or roughly 25% of its enlarged share capital, as well as additional cash resources of USD1 million to be provided to cover the company's contracted drilling obligations. African Potash is another faller after it secured roughly USD2 million in investment resources through a share placing and technical support agreement in order to start Phase 1 drilling at its Lac Dinga Potash Project in the Republic of Congo. Tavistock Investments is down despite the company reporting that losses narrowed to GBP516,000 in 2013, from GBP1.5 million a year earlier. The company has also appointed a new chief executive and two non-executive directors as it looks to move on from the difficulties it has endured after last year raising new funds and disposing of its loss-making software business.Strategic Natural Resources is down after it agreed with London Commodity Brokers to adjourn its winding up hearing, which was supposed to take place Monday, for one week. It said it continues to hold discussions with London Commodity Brokers after, in March, the group asked for Strategic Natural Resources to be wound up amid disputes and claims which have led to two separate legal battles.

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Top Economics And General

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The Confederation of British Industry has upgraded its UK economic outlook as the recovery continues to take hold. The business lobby forecast 3% economic growth this year, up from the prior estimate of 2.6%. Likewise, growth for 2015 was lifted to 2.7% from 2.5%. "Prospects are bright and we expect the recovery to broaden out this year, with greater support from business investment in particular," John Cridland, CBI Director-General, said.

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Several EU foreign ministers reject the referendum on independence in eastern Ukraine and say they support new sanctions over Russia's annexation of Crimea. "These votes, these attempts of referendums have zero credibility in the eyes of the world," British Foreign Secretary William Hague told reporters in Brussels. Swedish Foreign Minister Carl Bildt described the poll as "fake", while Dutch Foreign Minister Frans Timmermans said, "I think we should simply ignore this referendum because it is not a contribution to finding a way out from this chaos in eastern Ukraine."

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Security forces and pro-Russian separatists clashed in eastern Ukraine, after the unauthorized referendum showed overwhelming support for independence from the pro-Western government in Kiev. Separatists in Sloviansk targeted soldiers and the television tower with grenades, Interior Minister Arsen Avakov said on Facebook. No injuries were reported. Sunday's vote in the self-proclaimed "people's republics" of Donetsk and Lugansk was organized by the separatists despite international condemnation and a call from Russian President Vladimir Putin for a postponement. The separatists said voter turnout exceeded 80%, with a "yes" vote of nearly 96% in Lugansk and 90% in Donetsk.

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Ireland's construction activity continued to expand in April and registered its sharpest growth in more than nine years, data from Markit Economics showed. The Ulster Bank Purchasing Managers' Index rose sharply to 63.5 in April from 60.2 in March. Any reading above 50 indicates expansion in the sector. The construction sector expanded for the past eight months, with the latest expansion the sharpest since December 2004. Both growth of activity and new business reached multi-year highs.

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Japan's economy watchers' assessment of current conditions deteriorated notably in April, while outlook surged from March, survey data showed. The current conditions index plunged to 41.6 in April from 57.9 in the prior month. The score was forecast to fall to 45. Meanwhile, the outlook index climbed more-than-expected to 50.3 from 34.7. The expected reading was 40.

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Thailand's acting prime minister insisted that new elections are the only way to resolve to the protracted political crisis. Niwatthamrong Boonsongphaisan said the caretaker government was willing to work with all sides to end the impasse, but stressed that it must be done "within the framework of the constitution." "Any attempt by the courts (to launch a judicial coup) is done so at their own risk," he said. "We have legal mandate." Niwatthamrong will meet with the Election Commission Tuesday to find a possible date for new elections. He said he would not be a candidate.

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Envoys from Iran and the International Atomic Energy Agency were set to hold talks on broadening negotiations on Tehran's alleged nuclear weapons programmes, diplomats said. Iran has agreed to clear up the issue of its alleged work with detonators that could be used in nuclear warheads. The talks on this issue have not progressed, and the IAEA has demanded information about other suspect research projects, a Western diplomat said. "There is the aspiration that they will come up with a list of further topics to discuss," he said about the afternoon IAEA-Iran meeting in Vienna.

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French President Francois Hollande plans to host an African summit in Paris next Saturday to address the kidnapping of more than 270 Nigerian school girls, according to a report Sunday in Le Monde. Nigeria, Chad, Cameroon, Niger and Benin would likely participate, according to officials close to the president cited by Le Monde.

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Afternoon Watchlist (all times British Summer Time)



17:00 US Philadelphia Fed's Plosser speech

19:00 US Monthly Budget Statement



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Tuesday's Key UK Corporate Events



Enterprise Inns Full Year Results

Interserve Interim Management Statement

Speedy Hire Full Year Results

Cambria Automobiles Half Year Results

TUI Travel Half Year Results

Lombard Risk Management Full Year Results

National Express Group Interim Management Statement

HgCapital Trust Interim Management Statement

A&J Mucklow Interim Management Statement

Ark Therapeutics Group Interim Management Statement

Brit Group Interim Management Statement



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Tuesday's Key Economic Events (all times British Summer Time)



00:01 UK BRC Retail Sales Monitor

06:30 China Industrial Production

06:30 China Retail Sales

07:00 Germany Wholesale Price Index

07:45 France Current Account

09:00 Italy Consumer Price Index

10:00 Germany ZEW Survey

10:00 EU ZEW Survey

12:30 US NFIB Business Optimism Index

13:30 US Export Price Index

13:30 US Import Price Index

13:30 US Retail Sales

15:00 US Business Inventories



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By Steve McGrath; steve.mcgrath@alliancenews.com; @stevemcgrath1






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