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LONDON MARKET PRE-OPEN: Ladbrokes Coral And GVC In Merger Talks

LONDON (Alliance News) - Shares in London are set to open higher on Thursday, extending the ...

Alliance News 7 December, 2017 | 7:35AM
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LONDON (Alliance News) - Shares in London are set to open higher on Thursday, extending the gains seen on Wednesday, with the market getting an early wake-up call from bookmakers Ladbrokes Coral Group and GVC Holdings saying they are in "detailed" merger talks for a deal worth up to GBP3.9 billion.

The non-binding proposal is for GVC to pay 32.7 pence in cash and issue 0.141 GVC shares for each Ladbrokes share, with a further potential payout of 42.8 pence structured as a contingent value right that will be payable if certain targets are met.

Excluding the potential 42.8 pence deferred payout, the offer values Ladbrokes at 160.9 pence per share, or GBP3.10 billion in total. Including the maximum deferred consideration, the value rises to GBP3.90 billion. Ladbrokes shares closed on Wednesday at 135.70p.

Ladbrokes shareholders would own about 46.5% of the enlarged group while GVC shareholders would own the other 53.5%.

"Whilst the determination of the senior management positions will be finalised by the parties over the coming weeks, it has been agreed by the parties that [GVC Chief Executive] Kenneth Alexander would be the CEO of the enlarged group should the transaction proceed to completion," GVC said.

Ladbrokes Coral was itself formed in its present shape only late last year by the merger between Ladbrokes and Gala Coral Group, and the amount of synergies delivered came in much higher than originally expected.

IG says futures indicate the FTSE 100 index of large-caps to open 3.07 points higher at 7,351.10 on Thursday. The FTSE 100 index closed up 0.3%, or 20.53 points, at 7,348.03 on Wednesday.

"The FTSE is pointing to a positive start, building on the gains from the previous session. Stronger commodity prices such as copper and oil, which are rebounding in the Asian session after a recent rout, are expected to support the FTSE on the open," said Jasper Lawler at London Capital Group.

Sterling was quoted at USD1.3373 early Thursday, soft compared to USD1.3379 at the London equities close on Wednesday and well down from its best levels of the week above USD1.35.

"A softer pound could also prop up the FTSE on Thursday. Fears growing over a Brexit deal not being reached before next week's deadline are weighing on sentiment for sterling," Lawler said.

UK Prime Minister Theresa May spoke to her Irish counterpart, Leo Varadkar, and to the leader of Northern Ireland's Democratic Unionist Party on Wednesday following this week's collapse of a deal on the post-Brexit Irish border.

May discussed the border issue by phone with Varadkar and DUP leader Arlene Foster, with DUP sources saying afterwards that there was "still work to be done" to reach agreement, The Belfast Telegraph reported.

The DUP objected at the last minute to Monday's draft deal on the Irish border, which would have given Northern Ireland a special status in relation to the EU, saying it had no prior chance to view the text.

Back on the London Stock Exchange, FTSE 100-listed financial services firm Legal & General said it has experienced "particularly strong growth" in recent weeks, and remains well-placed to deliver strong growth in its core markets.

Legal & General Retirement has delivered total sales for 2017 to date of GBP6.2 billion, with the business showing strong momentum in the UK and US institutional pension risk transfer markets, as well as in individual annuities and lifetime mortgages.

Legal & General Investment Management achieved total external net inflows of GBP38.1 billion to the end of October. Inflows were well-diversified by product line and geography, Legal & General said.

"L&G is on track for a record year for earnings and profits. Our core business divisions are generating formidable momentum. With yesterday's announcement of the sale of our closed book, in run-off Mature Savings business for GBP650 million, our business is now well-positioned," said Chief Executive Nigel Wilson.

Coca-Cola HBC said it has appointed Zoran Bogdanovic as chief executive with immediate effect. He succeeds Dimitris Lois, who died in October.

Bogdanovic is currently a regional director, responsible for operations in 12 countries and has been a member of the Coca-Cola bottler's operating committee since 2013.

FTSE 250-listed DS Smith - which will begin trading in the FTSE 100 effective December 18 following the latest index review - reported an increase in interim revenue but a slight fall in profit, due to acquisition and fibre costs.

Revenue rose to GBP2.80 billion from GBP2.36 billion in the six months to October 31, but pretax profit fell to GBP144 million from GBP146 million.

Input costs were substantially higher period-on-period, DS Smith said, reflecting a rise in fibre costs and in paper pricing. The corrugated packaging firm also said it was hit by higher amortisation and adjusting items related to acquisitions in the period.

"The outlook remains positive as we begin our second half with good momentum. Our packaging proposition that delivers real value to our customers is reflected in our volume growth and, while input cost pressures remain, we continue to recover those costs as planned," said DS Smith.

Electra Private Equity reported a "strong" performance for the year ended September 30, with a total shareholder return of 21%, above the 14% return from the FTSE 250.

Net asset value per share at September 30 was 1,981 pence, a total return of 9% for the year. However, this was down significantly from 5,149p at September 30, 2016.

Due to the "exceptional level of special dividends" paid to shareholders over the past 12 months, the Electra said it has elected not to pay an ordinary dividend for its recently ended year.

In the US on Wednesday, Wall Street ended mixed, with the Dow Jones Industrial Average ending 0.2% lower, the S&P 500 flat, and the Nasdaq Composite 0.2% higher.

The choppy trading on Wall Street came as traders expressed uncertainty about the economic impact of the Republican tax reform plan. While the Senate passed a USD1.5 trillion tax reform bill early Saturday, this must now be reconciled with the version passed through the House of Representatives.

Concerns about the possibility of violence in the Middle East also weighed on the markets as US President Donald Trump announced he is officially recognizing Jerusalem as the capital of Israel.

"Today we finally acknowledge the obvious - that Jerusalem is Israel's capital," he said in Washington, adding that he still supported a two-state solution to the Israeli-Palestinian conflict.

Palestinian Authority President Mahmoud Abbas said Trump's Wednesday announcement, which overturns decades of US policy and will see the US embassy move from Tel Aviv to Jerusalem, was "reprehensible".

Theresa May in response to Trump's decision said: "We disagree with the US decision to move its embassy to Jerusalem and recognize Jerusalem as the Israeli capital before a final status agreement. We believe it is unhelpful in terms of prospects for peace in the region."

In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite closed down 0.7%, while the Hang Seng index in Hong Kong is up 0.5%.

Japan's leading index decreased for the second straight month in October, in line with expectations, preliminary figures from the Cabinet Office showed Thursday. The leading index, which measures the future economic activity, dropped to 106.1 in October from 106.5 in September. The figure also matched consensus estimate.

Meanwhile, the International Monetary Fund said in a report Thursday China's soaring levels of corporate, government and household debt are threatening the country's financial stability, and urged the government to move away from credit-fuelled economic growth.

China's credit-to-GDP ratio now stands at around 25%, which is "very high by international standards" and "consistent with a high probability of financial distress," the report said.

Corporate debt has reached 165% of gross domestic product while household debt has also risen quickly over the past few years, the IMF said.

The Chinese government is prioritizing "social stability" in the near-term, appearing "to rely on credit expansion to continue financing firms even when they are not viable," the report said.

The economic events calendar on Thursday has UK Halifax house prices data at 0830 GMT and the third quarter reading of eurozone GDP at 1000 GMT. In the afternoon there is US initial jobless claims at 1330 GMT, which prelude nonfarm payrolls for November on Friday.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2017 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Electra Private Equity Ord 940.50 GBX 1.13 -
Smith (DS) PLC 521.50 GBX -0.10 -
Ladbrokes Coral Group PLC 177.30 GBX -0.73 -
Legal & General Group PLC 265.30 GBX 0.57 -
Coca-Cola HBC AG 2,317.00 GBX -0.09 -
GVC Holdings PLC 950.00 GBX -1.14 -
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