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LONDON MARKET OPEN: Ladbrokes Leads Midcaps On GBP4 Billion GVC Deal

LONDON (Alliance News) - London indices were in the green early Thursday, the FTSE 250 index ...

Alliance News 7 December, 2017 | 8:39AM
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LONDON (Alliance News) - London indices were in the green early Thursday, the FTSE 250 index outperforming the FTSE 100 as gains for mid-cap bookmakers Ladbrokes Coral and GVC Holdings on news of GBP3.9 billion merger talks supported the index.

Ladbrokes Coral jumped to the top of the FTSE 250, up 28% at 173.20 pence, while GVC was up 4.4%.

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.

"The proposed tie-up has been rumoured for a while. We see significant merits in the tie-up notably from cost synergies, a more diverse geographic footprint and reduces the risk around UK regulation and machines in particular," said Shore.

The FTSE 100 index was up 0.1%, or 9.26 points at 7,357.29 early Thursday. The mid-cap FTSE 250 index was up 0.3% at 19,883.97. The AIM All-Share index was up 0.2% at 1,013.52.

The BATS UK 100 index was up 0.1% at 12,497.43. The BATS 250 was up 0.2% at 18,054.68, and the BATS Small Companies down 0.1% at 12,371.16.

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. Brexit uncertainty was continuing to weigh on the currency, and providing a lift to the dollar-earner heavy FTSE 100.

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 was up 0.4%, having reported "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, up 0.6%, 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.

In the FTSE 250, Aveva Group was up 4.4% after Barclays lifted the engineering software developer to Overweight from Equal Weight.

William Hill was up 3.8% after reaching an agreement with Scientific Games Corp to "unconditionally support" its proposed acquisition of Toronto-listed NYX Gaming Group in which it owns a stake.

The gambling firm owns both ordinary and preference shares in its Canadian peer. William Hill's stake was acquired in 2016 for GBP80 million in order to support NYX's GBP270 million acquisition of software gaming company OpenBet.

Mid-cap 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 costs. The corrugated packaging firm was up 2.0% early Thursday.

Pretax profit for the six months to October 31 fell to GBP144.0 million from GBP146.0 million the same period the year before, mainly due to an increase in one-off costs to GBP40.0 million from GBP21.0 million last year.

Adjusted operating profit, which excludes these costs and the amortisation of intangible assets, rose 6.0% on a constant currency basis and 11% on a reported currency basis to GBP251.0 million.

Revenue for the period was up 14% at constant currency and 19% at reported rates to GBP2.80 billion from GBP2.36 billion the prior year.

"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.

Iron ore miner and processor Ferrexpo, up 3.1%, said it will pay a special dividend of 3.3 US cents, doubling its total payout for the year so far after declaring its first interim dividend earlier this year. The 3.3 US cent interim dividend was paid in early September, and shareholders will now receive another 3.3 cent special payout.

Investec was down 2.7%. The Anglo-South African bank went ex-dividend on Thursday.

In mainland Europe, the CAC 40 in Paris was up 0.1% while the DAX 30 in Frankfurt was up 0.2%.

The economic events calendar on Thursday has 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.

Already released, Germany's industrial production dropped unexpectedly in October, data from Destatis showed. Industrial production fell 1.4% month-on-month in October, following a revised 0.9% drop in September. Production was forecast to rebound 0.9%.

Elsewhere in Germany, the Social Democrats party will hold a conference opening Thursday to consider a call from the centre-left party's leadership to launch talks with Chancellor Angela Merkel so to end the nation's political gridlock following September's election.

SPD leader Martin Schulz attempted on Wednesday to rally his party behind the talks with members torn between backing Merkel for a fourth term in power or going into opposition to regroup after suffering its worst result since 1949 at the September poll.

In addition to rejoining a Merkel-led coalition, the SPD congress is also set to consider whether the party might agree to another way of backing the chancellor in office either by tolerating a CDU-CSU government in parliament or supporting a minority government headed by the chancellor.

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 closed up 0.3%.

China underperformed peers after the International Monetary Fund said in a report Thursday its 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.

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.

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
Smith (DS) PLC 521.00 GBX -0.19 -
Ladbrokes Coral Group PLC 177.40 GBX -0.67 -
William Hill PLC 313.80 GBX 0.87 -
Ferrexpo PLC 261.70 GBX 3.07 -
Legal & General Group PLC 266.00 GBX 0.83 -
Coca-Cola HBC AG 2,332.00 GBX 0.56 -
Investec PLC 477.50 GBX 3.49 -
AVEVA Group PLC 2,715.00 GBX 0.33 -
GVC Holdings PLC 950.50 GBX -1.09 -
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