Johnson Matthey (JMAT), Prudential (PRU), Frasers (FRAS), BAE Systems (BA), BP (BP.), Shell (SHEL), Smart Metering Systems (SMS) and PRS Reit (PRSR)
Johnson Matthey (JMAT) will sell its medical business to private equity firm Montagu for $700mn (£550mn), the latest stage in its strategy to cut away units outside the core exhaust systems business. The company will hand almost half of the proceeds, £250mn, back to investors through a buyback programme once the deal has completed, expected in the third quarter. The shares climbed 8 per cent on the news.
Analysts at Jefferies had forecast “at least £300mn” of cash for the unit, so the £550mn price represents a handy increase on expectations. Chief executive Liam Condon said the deal was a “significant milestone” in the company’s disposals programme. The unit brought in revenue of £45mn in the six months to 30 September, a fraction of the £2bn total (excluding precious metals sales). AH
Read why we’re bullish on Johnson Matthey
Prudential powers profits, but not buybacks
Results for Hong Kong-based life insurer Prudential (PRU) seemed to tick most of the boxes, with a 50 per cent increase in new business profits of $3.1bn (£2.4bn) carrying the company well within range of its target of $4.4bn-$5.4bn by 2027.
The much-improved result also meant a decent hike in the annual dividend of 9 per cent with future payouts expected to grow in that range.
The tepid market reception on results day was slightly inexplicable, though seems to have been due to the lack of a significant buyback announcement, even though Prudential’s book is throwing off large amounts of excess regulatory capital – the free surplus was $2.86bn in 2023.
Part of the problem is that any significant buyback must be balanced between improving liquidity in the Hong Kong market by scrip share issuance, with a matching share buyback in London, which is an option that management is currently exploring. The only significant capital outlay on shares was a $41mn buyback to neutralise the dilutive effect of vesting employee awards.
When you consider the generally poor sentiment that any company with a large exposure to the Chinese market currently attracts, then the current reticence around the shares starts to make more sense. JH
Read more: The best yields on offer from life insurers
BAE raises $4.8bn to fund Ball deal
BAE Systems (BA) is issuing $4.8bn (£3.8bn) worth of bonds to institutional investors through a private placement.
The company is issuing notes ranging in tenure between 3 and 30 years at interest rates of between 5 and 5.5 per cent, with the proceeds being used to repay a $4bn bridge loan taken out last year to fund its $5.5bn acquisition of Ball Aerospace. MF
Read more: BAE Systems reports record orders amid uncertain world
Deadline for SMS bid looms
Private equity firm Kohlberg Kravis Roberts (US:KKR) looks set to get its bid for Smart Metering Systems (SMS) over the line, despite initial hostility.
KKR’s bid of 955p a share, valuing the company at around £1.3bn, was recommended to shareholders by SMS’s board in December but was initially rejected by a group of shareholders including the company’s co-founders, Alan Foy and Steve Timoney, and Primestone Capital. The group, who hold around 17.8 per cent of the shares, had argued the bid undervalued the business.
However, KKR doubled down and switched the offer structure from a scheme of arrangement to a takeover. As well as declaring the offer as final, it set acceptance conditions to 50 per cent plus one share, which is the lowest level permitted under the takeover code.
The deadline for the bid is effectively this Friday and KKR reported on Wednesday that it has received acceptances equating to 33.1 per cent of the shares. On Tuesday, Primestone and SMS’s co-founders said that in light of the terms and the lack of any third-party bid, they “now intend to assent” to the offer. MF
