Parliamentary war
Amid this week’s parliamentary turmoil, as some MPs sought to block a no-deal Brexit, chancellor Sajid Javid unveiled a £14bn boost to public spending next year. That included £3.6bn for the new towns fund, an additional £2.6bn on education and an extra £2.2bn in defence spending. The decline in sterling against the US dollar – which fell to its lowest point in more than three years on 3 September – had steadied at the time of writing, as investors perceived the prospect of the UK leaving the EU without a deal as less likely.
A Premier deal
Managers consolidate
Given the challenges facing asset managers – particularly boutique firms – it is perhaps understandable that Premier Asset Management (PAM) is looking for strength in numbers. The asset manager announced plans to merge with Miton Group (MGR), creating a group with combined assets under management of £11.5bn. The combined entity, which will be known as Premier Miton, will benefit from £7m of annual pre-tax cost synergies and what management of both groups describe as “complementary investment capabilities”. Under the terms of the deal, Miton's shareholders will be entitled to receive a 4.9p a share special dividend, plus 0.30186 Premier shares for each share they own, giving them a third of the overall company.
Tesco offloads mortgages
Competition intensifies
Where Tesco (TSCO) saw only “challenging market conditions” and “limited profitable growth opportunities”, Lloyds Banking (LLOY) clearly smells opportunity, judging by its acquisition of the supermarket’s £3.7bn prime UK residential mortgage portfolio. The deal will add 23,000 customers to the UK’s largest mortgage lender, and a loan book that generated a pre-tax profit of £9m in the year to February. For this, Lloyds has paid a 2.5 per cent premium to book value, although the bank says the acquisition will generate returns above “current organic market opportunities”.
Landlords fight back
High Court challenge
The future of Debenhams is once again in doubt, as commercial landlords challenged the restructuring deal that saved the retailer in the High Court. The landlords, which are part of the Combined Property Control Group, are seeking to overturn the terms of the company voluntary agreement (CVA) agreed with creditors. The CVA would see 22 Debenhams stores closed and rents reduced on a further 100. The landlords argue that the decision was unfair and that they have been treated less favourably than other creditors.
Italian progress
Markets calmed
Italian bonds surged once again this week after expectations rose of a new coalition government formed by the Five Star Movement and the Democratic Party. The yield on 10-year Italian debt fell to a record low as Giuseppe Conte looked likely to meet the country’s president, potentially ending almost 18 months of political turmoil. The two parties this week released a 26-point draft government programme, pledging to pursue an “expansive” budget and appealing on the EU to show enough flexibility in its rules to accommodate growth within the Italian economy.
Risers and fallers (%)
| NMC HEALTH | +12.84 |
| WILLIAM HILL | +10.58 |
| FRESNILLO | +9.52 |
| MEDICLINIC INTERNATIONAL | +8.77 |
| OCADO GROUP | +8.74 |
| AMIGO HOLDINGS | -54.07 |
| MICRO FOCUS INTL. | -28.91 |
| NOSTRUM OIL & GAS | -21.81 |
| THOMAS COOK GROUP | -15.25 |
| MCBRIDE | -14.53 |
Week to 3 September 2019
Brakes applied
HS2 delayed
Transport Minister Grant Shapps revealed that the first phase of the HS2 high-speed railway between London and Birmingham would be delayed by up to five years. That part of the line had been due to open at the end of 2026 but could be pushed back until as late as 2031, while the second phase of the project has also been delayed and is now set to open between 2035 and 2040. The controversial railway scheme has also run over the initial expected cost of £62bn and is expected to come in at between £81bn and £88bn.
Burford mounts defence
Shares languish
Burford Capital’s (BUR) extended rebuttal of Muddy Waters’ short-selling note continued this week, with an extended chronology of its investment in Napo Pharmaceuticals’ litigation against Salix Pharmaceuticals. One of the litigation funder’s earliest investments, the case has been the subject of investor inquiries following what Burford describes as “inaccurate and misleading” reporting by Muddy Waters. The group also said it planned to “provide a further presentation on other accounting and disclosure matters” in a forthcoming update.
