The revived prospect of a trade war between the US and China has dampened sentiment in London. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
In its most significant transaction since it was spun out of BHP Billiton, South32 (S32) is to buy Canada-listed Arizona Mining, in a $1.3bn (£980m) all-cash offer. The deal, which values the owner of the Hermosa project and Taylor deposit at a 50 per cent premium to its Friday closing price, expands South32’s presence in North America and has been billed as offering the potential to “deliver a very high internal rate of return on investment”. Shareholders in Arizona are expected to approve the sale at a meeting in September. Buy.
Drilling results from North African explorer and producer SDX Energy (SDX) received a lukewarm reception from shareholders this morning, despite a discovery at the SD-4X well at its South Disouq concession in Egypt. Though that well revealed a reservoir section of similar quality to the original SD-1X discovery well, shares are off 4 per cent this morning on the news that the well test program in the LMS-1 well at the Lalla Mimouna Nord permit in Morocco has flowed at sub-commercial rates. The company believes the current flow rate is temporary, but further testing is required ahead of a repeat of the well-test. We remain buyers.
KEY STORIES:
CYBG (CYBG) and Virgin Money (VM.) have agreed terms for an all-share merger, under which shareholders in the latter will receive 1.2125 new CYBG shares in exchange for each Virgin Money share. Based on the 306p closing price of CYBG shares on 15 June, the offer values each VM share at 371p and the group at £1.7bn. That’s a 19 per cent premium to Virgin’s closing price the day prior to the offer first being mooted in May.
Non-Standard Finance (NSF) confirmed that trading during the second quarter was in line with management expectations, with strong year-on-year loan book growth across all three of its businesses. Meanwhile each of its 11 Everyday Loans branches opened this year is performing well, management said.
The merger between Rentokil Initial (RTO) and Cannon Hygiene has run into regulatory trouble. The Competition and Markets Authority have raised concerns the merging of the two companies may lead to “very limited competition from other suppliers of washroom products and services”. Rentokil did not disclose the amount it bought Cannon for in January, but the companies are two of the top three largest in the washroom products and services business. RTO and Cannon now have until 25th June to propose a solution, otherwise the CMA will open a phase 2 investigation. Hold.
The gradual stake-building of a mysterious investor known as ‘Blofeld’, might raise some alarm bells – at least for James Bond fans. But for oil services group Lamprell (LAM), share-buying by Blofeld Investment Management, a private family fund based in Saudi Arabia, is a welcome development. Today, Lamprell said the investment by Blofeld, whose owners also control in-country partner Asyad, was “supportive to the company’s strategic exposure in the region”. Central to this will also be the success of a bid to become a long-term contractor to state-oil group Saudi Aramco. Shares in the group, flat today, and up nearly 46 per cent since a woeful set of full-year results in March.
Packaging group DS Smith (SMDS) boosted full year adjusted pre-tax profit by a fifth, helped along by acquisitions and recovering paper prices. The new financial year has “started well” with volume growth momentum. The scale of operations could be set to increase through the proposed acquisition of Spanish rival Europac for €1.9bn, funded by a rights issue and senior debt. Nevertheless, the group expects to have net debt to cash profits of less than 2.5 times by the end of the current financial year.
Shares in Premier Technical Services Group (PTSG) are up 1 per cent this morning. The group has been trading in line with expectations in the year, with strong order levels and sales growth. As before, trading has been especially strong in the fire solutions business.
OTHER COMPANIES:
Jackpotjoy (JPJ) has paid the final earn-out instalment for its Spanish business Botemania, bringing the total payment to £63.5m. The Jackpotjoy segment, which includes the Jackpotjoy, Starspins and Botemania brands, was acquired from Gamesys Limited in April 2015. The earn-out payments have been funded entirely in cash. Up to a further £10m could still be paid if the Jackpotjoy brands achieve operating profit targets for the years to March 2019 and 2020.
