News Column

Shire shares surge following takeover bid

June 21, 2014


DRUGS company Shire has seen its shares surge by 17 per cent after the FTSE 100 firm became the latest target for a US-based rival.

AbbVie first approached Shire at the start of May and said that its third and latest cash and shares proposal at the end of last month valued the company at 4626p a share, or pound(s)27.2 billion.

Shire rejected the approach and has advised its shareholders to take no action but shares still rose 633p to 4371p and to the top of the blue-chip risers board.

"We've been quite bullish on pharma stocks due to the [merger and acquisition activity] for quite some time. We haven't sold Shire after the spike higher, we're just holding on to it," said Dafydd Davies, senior trader at Prime Wealth Group.

The merger and acquisition activity boosted the FTSE 100 Index, which was 17.1 points higher at 6825.2, despite flat trading elsewhere in Europe and a disappointing session in Asia.

Sterling eased from a five-and-a-half-year high against the dollar, at 1.70, as the America currency was helped by higher yields on US treasuries. The pound was also down against the euro, at 1.25.

The other focus of the session was on the banking sector after the start of conditional dealings in TSB.

The offer, which was priced at 260p per share, valued the business at pound(s)1.3 billion and involved the sale of 35 per cent of the business by Loyds Banking Group instead of the 25 per cent originally planned.

Shares rose by around 12 per cent to 290p.

Meanwhile a surprise move by Sainsbury's to enter the discount market in a joint venture with Danish supermarket Netto had a negative impact on shares.

The Danish company, which left the UK in 2010, said it will open 15 stores in the UK next year. Netto owner Dansk Supermarked and Sainsbury's will invest pound(s)12.5 million each.

Sainsbury's said the move gets it into the fast growing discount sector, worth an estimated pound(s)10 billion a year, but it also admitted it will book start-up losses of pound(s)5 million to pound(s)10 million on the venture in the year to March 31. Shares fell 4.5p to 316.8p.

Royal Mail shares were lower after it provided warnings to the regulator over the threat to the universal delivery service posed by competitors such as TNT Post.

The newly privatised company said the lack of intervention from Ofcom would undermine its ability to reach a five to ten per cent earnings margin and TNT Post's plans would reduce its revenues by over pound(s)200 million in 2017-18. Royal Mail slipped 0.6p to 483.7p.

The biggest risers on the FTSE 100 were Shire up 633p to 4371p, International Airlines Group up 9p to 384.6p, Whitbread up 103p to 4403p and British Sky Broadcasting up 20p to 891.5p.

The biggest fallers on the FTSE 100 were Melrose down 7.5p at 262p, CRH down 35p to 1622p, BG Group down 20.5p to 1239.5p and Vodafone down 3p to 191.9p.

US stocks rose yesterday, driving the Dow and the S&P 500 to close at record highs as the shares of 330 companies hit 52-week highs on the New York Stock Exchange.

The S&P 500 scored its third record closing high in a row.

For the week, the three major US stock indexes rose one per cent as investors brushed off geopolitical concerns about Iraq and focused on the Federal Reserve's comments indicating that it will keep interest rates low.

The benchmark S&P 500 has gained for six consecutive days, supporting a cautious view a near-term correction is inevitable.

"I'm becoming a bit concerned now with where the market is, especially with many indicators hitting levels that are contrary to the normal reading," said Randy Frederick, managing director of active trading and derivatives for Charles Schwab.

The most notable indicators included the correlation of the CBOE Volatility Index, known as the VIX, with the S&P 500. The VIX usually moves inversely to the S&P 500. The fear gauge is near its lowest since February 2007 while the S&P 500 is at an all-time high. This is causing concern that the market may be too complacent.

The Dow Jones industrial average rose 25.62 points or 0.15 per cent, to 16,947.08. The S&P 500 gained 3.39 points, to 1,962.87. The Nasdaq Composite added 8.71 points, to 4,368.04.

Oracle Corp shares dropped four per cent to $40.82 and ranked among the biggest drags on the S&P 500. But CarMax surged 16.5 per cent to $52.75. The used-car company's stock was the S&P 500's best performer.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Herald, The (Scotland)

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