Market Report: Delta stake makes Sainsbury's bid 'less likely'
By Andrew Dewson
Published: 27 April 2007
Traders believe that confirmation that the Qatari-based investor Delta is now the largest single shareholder in J Sainsbury, with a 17.4 per cent stake, makes a bid for the whole group less, rather than more, likely.
Although the acquisition of the stake means management will probably face more pressure from Delta and Robert Tchenguiz, who has a 5 per cent stake and close ties to Delta's management, the prospect of a bid to take over the entire group now looks remote. One trader said: "Given that Delta paid 575p [per share] for its stake and the Sainsbury family were reluctant to sell at a similar price, anyone thinking about a bid will probably now have to think in the region of 650p. If nobody was prepared to offer that much a fortnight ago, there seems little chance of anyone changing their minds now. For the time being, Sainsbury looks like it is off the market and the stock could drift lower." Even so, the shares managed to tick half a penny firmer to 568.5p.
The world's largest contract caterer, Compass Group, was in focus in early deals thanks to a bullish outlook and strong first-half numbers from the European rival Sodexho Alliance. The French group reported first-half pre-tax profits of €364m (£249m), 6.7 per cent ahead of consensus forecasts. Compass rallied 11.25p in early deals before a bout of profit-taking saw the shares close just 1.75p better at 358.5p.
Buoyant global equity markets are good news for asset managers, and a solid set of first-quarter numbers from Amvescap added to the bullish mood in the sector. Operating profit at the Anglo-American fund manager rose 27 per cent, although the broker Cazenove & Co noted stripping out performance-related fees the numbers were at the bottom end of forecasts. Even so, Amvescap closed 23.5p better at 600.5p, with Man Group also in demand, 8p better at 561.5p.
Despite the record close of the Dow Jones index, London traders were in subdued mood, and the market failed to maintain the momentum of an early rally to 6,511.1. A sterling set of numbers from the household goods group Reckitt Benckiser saw its shares soar 147p to 2,775p, but there was little else to cheer traders although Wall Street opened positively. The FTSE 100 closed 7.5 better at 6,469.4.
Millennium & Copthorne Hotels found support ahead of full-year numbers due next week. February's fourth-quarter trading update indicated a strong finish to last year and a positive start to the current year, and the group is expected to post a 14 per cent jump in pre-tax profits to £95m. The stock has also attracted some bid speculation and firmed 31.5p to 741.5p.
Shares in PartyGaming took a hammering as Congressman Barney Frank, the head of the US financial services committee, spoke. Some investors were hoping to hear him endorse the repeal of legislation that hit the online gambling industry in October, but they were disappointed. With the chances of a repeal looking slim in the short term, investors banked some profits, sending PartyGaming 7.5p lower to 51p.
Elsewhere in mid-cap gambling stocks, talk of a private equity-backed bid for Ladbrokes, Europe's largest operator of betting shops, looks quickly to have run out of steam. The shares lost a penny to 414.75p and although more than 13 million changed hands the market seems to have little enthusiasm for the speculation.
Numis Securities initiated coverage of Aero Inventory, the aircraft parts services provider, with a "buy" recommendation and a 495p price target. In a note to clients, the broker highlighted Aero Inventory's strong deal flow, its niche web-based inventory management and the growth of the airline industry. The shares rallied 15.75p to 387.75p.
Tanfield Group, 6.5p firmer at 134p, which converts vehicles to run on electricity, won another decent contract as the business post group TNT Express ordered 55 battery-powered trucks following a six-month trial. The word among small-cap investors is that more deals are in the pipeline as business users seek to reduce carbon emissions.
Look out for some activity in 3DM Worldwide, the plastics group. The word among small-cap traders is that Alliance Cornhill has bought 11 million shares in the past two days. The speculation is that the company, which has been in the doldrums for the past two years, is on the verge of signing a major deal with General Motors.
Finally, World TV, the webcasting and streaming group, told investors it would cancel its AIM listing despite having received several takeover offers. The shares fell 0.23p to 0.22p.
