Money News
With the current crop of M+A activity last minute contenders are making a bid for inclusion in the FTSE 100 Index when its review committee next meets to decide on who's promoted and who's demoted, says Aberdeen Asset Managers.
The recent surge in Eurotunnel shares, for example - after its debt was restructured - suddenly brings that company into the spotlight. However, bids and bid rumours continue to dominate market moves as private equity groups seek to spend the funds they've raised.
Over half of the £40 billion of take-overs in the UK in Q1 were private equity funded. And at the latest count there are 29 UK bids for local and overseas companies formally declared, totalling well over £70 billion. Waiting to be declared there is probably that much again - size being no object, it seems.
Unilever is the latest rumour for the M&A mill because of its break-up potential, despite having a joint UK-Dutch quote which values it at around a whopping £50 billion. Meanwhile, the mining giants remain rumour favourites, with Rio Tinto and Anglo American topping the list.
Still at the head of the promotion list to the Footsie is the UK's (current) largest house builder, Barratt Developments (BDEV), which gains automatic promotion after the £2.2 billion take-over of Wilson Bowden. Its market capitalisation of £3.7 billion puts it at position 86.
Meanwhile, Bradford & Bingley (BB.) seems most likely to drop out. Recent investor concerns over continued rate rises feeding through to the housing market have led to ABN AMRO warning of a risk to earnings. At position 108, and with a market capitalisation of £2.8 billion, forced demotion could follow. Other candidates whose shares are lagging are Drax (DRX) and Tate & Lyle (TATE).
Drax appears out of favour on the market's dim view of energy prices falling in a record warm winter that left high levels of gas storage across Europe. A swell of private equity bid speculation saved the £2.8 billion group from demotion to the FTSE 250 last time round and could just be doing so again.
Tate & Lyle's admission of slower than expected sales for its sucralose sugar substitute, together with increased patent and production costs, has knocked that company's share price. Further share price falls of 2% and 6.5% respectively could see either heading out of the FTSE 100.
Top reserve list stocks currently are: British Energy, Rentokil, Invensys, FirstGroup, Burberry and Group4 Securicor.
Meanwhile, the Stefano Pessina/KKR group offer of 1139p per share for Alliance Boots (AB.) will complete on June 26th, leaving another FTSE 100 slot up for grabs.
Intercontinental Hotels (IHG) will go ex its announced 200p special dividend, due for payment on June 15th. This will cut its market cap by over £700 million and reduce its position from 70 to 83 in the blue chip index.
Finally, Kelda (KEL), returning capital of £750 million, goes ex its own 210p special dividend on June 18th. Its shrinking market cap puts it in real danger of demotion at the September review point.
01 June 2007 © Moneyextra.com
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