LONDON BRIEFING: M&A News For William Hill And LV=; Diageo Outperforms

(Alliance News) - Merger and acquisition news gave the London market some welcome distraction ...

Alliance News 28 September, 2020 | 8:05AM
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(Alliance News) - Merger and acquisition news gave the London market some welcome distraction early Monday from the drumbeat of warnings over the spread of the coronavirus and the damage of a no-deal Brexit.

US casino-operator Caesars Entertainment said it has made a possible cash offer for William Hill, which it said the board of the UK bookmaker would accept. Imperial Brands said the sale of its Premium Cigars business is still on, and insurer LV= confirmed it is in talks for a possible takeover.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: up 1.0% at 5,900.81

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Hang Seng: up 0.9% at 23,450.17

Nikkei 225: closed up 1.3% at 23,511.62

DJIA: closed up 358.52 points, 1.3%, at 27,173.96

S&P 500: closed up 1.6% at 3,298.46

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GBP: up at USD1.2775 (USD1.2700)

EUR: firm at USD1.1635 (USD1.1623)

Gold: down at USD1,858.11 per ounce (USD1,863.20)

Oil (Brent): down at USD41.55 a barrel (USD41.76)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Monday's Key Economic Events still to come

1100 BST Ireland retail sales index

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New local lockdowns, further restrictions and tough new fines for failing to self-isolate come into force across parts of the UK on Monday. People across England will be legally required to self-isolate from this week if they test positive for coronavirus or are contacted by the test & trace service. If they do not they risk being hit with new fines starting at GBP1,000 and increasing up to GBP10,000 for repeat offenders or serious breaches, the Department of Health & Social Care said. People who test positive for Covid-19 will also be fined if they knowingly provide false information about close contacts to the test and trace service. But people on low incomes who cannot work from home and have lost income as a result will be eligible for a new GBP500 test & trace support payment.

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Irish Taoiseach Micheal Martin has said he is "not optimistic" that Britain will strike a post-Brexit trade deal with the EU. Martin said there was still the "potential for a deal", but warned that the UK government's controversial legislation which enables the UK to break international law had "eroded trust". He told the i newspaper in an interview to be broadcast at the Liberal Democrat conference on Monday that the UK Internal Market Bill "damaged the credibility" of agreements already entered into. Asked if he believes a free trade agreement is likely, he said: "I'm not that optimistic, if I'm honest. Just to let you know that the [Irish] government is preparing its budget in three weeks' time on the basis that there will be a no-deal Brexit. That's the basis on which we're preparing the budget and we're warning and alerting businesses to that terrible reality."

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European businesses are concerned about the lack of progress in the ongoing negotiations between the UK and the EU and warned of a no-deal Brexit. "We are sleepwalking into a precipice," Markus Bayrer, director general of the employers' association Business Europe, said in a statement published Monday. Business Europe expressed concern regarding the complexity of issues that still needed to be discussed in the little time that was left and called on both sides to find compromise. The last round of Brexit talks is scheduled for Tuesday.

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BROKER RATING CHANGES

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BERENBERG CUTS COUNTRYSIDE TO 'HOLD' ('BUY') - TARGET 330 (360) PENCE

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BARCLAYS RAISES CARNIVAL TO 'OVERWEIGHT' (EQUAL WEIGHT)

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JPMORGAN RAISES SPIRE HEALTHCARE TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 175(136) PENCE

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COMPANIES - FTSE 100

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Brewer and distiller Diageo said it has made a good start to financial 2021 with improvements in its performance across all regions following the gradual re-opening of the on-trade channels such as in bars and hotels in most markets. The company, which is holding its annual general meeting on Monday, said the pace of recovery from the Covid-19 pandemic and easing of government restrictions varies by market. The Johnnie Walker scotch maker said its US business is performing strongly and ahead of expectations, reflecting resilient consumer demand. Spirits continuing to gain share within the total beverage alcohol market. Increased retailer confidence is resulting in some re-stocking in the off-trade channel, it noted. Diageo said in Europe, off-trade demand - meaning retail outlets - remains robust and the on-trade channel - meaning bars and restaurants - has largely re-opened with the easing of lockdown measures in most countries. However, it noted the risk of additional restrictions remains where infection rates are worsening. In China, the on-trade channel continues to recover, although larger banqueting occasions are returning more slowly. Looking ahead, Diageo said the outlook for the first half of 2021 has improved since the year-end, reflecting the good start to the year, particularly for the US business. The company continues to expect an improvement in organic net sales and operating profit compared to the second half of 2020. However, compared to the first half of 2020, it still expects lower organic net sales and margin dilution.

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Imperial Brands said the sale of its Premium Cigars business is expected to complete on October 29, which is delayed slightly it said due to the challenges caused by Covid-19. In April, Imperial Brands agreed to sell its premium cigar business for more than EUR1 billion to two private buyers. The tobacco firm said buyers Gemstone Investment Holding and Allied Cigar Corp have made a non-refundable down-payment of EUR91.7 million to Imperial. In addition, the purchasers have agreed to pay a further non-refundable down-payment of approximately EUR85 million to Imperial by October 7.

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COMPANIES - FTSE 250

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Caesars Entertainment, the owner of Caesars Palace in Las Vegas, confirmed it is in advanced discussions concerning a possible cash offer for William Hill, its partner in a US joint venture. The possible cash offer of 272 pence per share values William Hill at around GBP2.9 billion and is a 58% premium to William Hill's closing share price on September 1, the last business day before Caesars' first approach to William Hill. Caesars said it has finalised its due diligence and a further announcement will be made as and when appropriate. It expects that a transaction would close in the second half of 2021. On Friday, William Hill had confirmed it received separate cash proposals from New York-based alternative asset investment manager Apollo Management International and from hotel and casino operator Caesars Entertainment. According to Caesars, William Hill's board has indicated that the possible cash offer is at a price level that they would recommend to William Hill shareholders. Caesars intends to use an equity capital raise to help fund the offer. Caesars also said that if Apollo instead acquires William Hill, Caesars would be entitled to terminate the mobile market access rights and rights to operate sportsbooks at Caesars premises that are granted to to the pair's US joint venture by Caesars.

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COMPANIES - OTHER

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Liverpool Victoria Financial Services confirmed it is in talks with "a number of parties" for a potential transaction. The statement by the insurer, which trades at LV=, was made in response to a Sky News report on Saturday that Royal London Mutual Insurance Society could be days away from sealing a GBP500 million takeover of its smaller peer. Sky News said the two firms are in detailed talks over a potential deal that would create an entity with nearly 10 million customers in the UK. Quoting sources close to LV=, Sky News reported that LV='s valuation is over GBP500 million, but some way off the GBP1 billion mark. Talks between the duo are not yet exclusive, and Sky News added that private equity firm Bain Capital also mulling buying LV=. LV= said Monday the discussions are part of its previously announced strategic review. It said the talks are on-going but there can be no certainty of a deal being done.

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Aldi has said it plans to open 100 new stores in the UK with GBP1.3 billion of investment by the end of next year, as it revealed sales continued to jump higher. The discount supermarket said it plans to create 4,000 jobs next year as part of the expansion plan, which is part of long-term plans to grow to a portfolio of 1,200 stores by 2025. Aldi will drive investment into creating and upgrading stores, distribution centres and innovation across its operations, it said. The update came as Aldi reported that sales increased by 8% to GBP12.28 billion in 2019. Meanwhile, it saw pretax profit jump by 49% to GBP271.5 million for the year.

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COMPANIES - GLOBAL

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A judge is due to decide on Monday whether Uber Technologies is successful in its bid to regain its licence to operate in London. Deputy Chief Magistrate Tan Ikram will hand down his decision on Uber's appeal against Transport for London's refusal to renew its operating licence after it was removed due to safety concerns. It follows a four-day hearing at Westminster Magistrates' Court earlier this month. TfL rejected Uber's application for a new London licence in November 2019, due to "several breaches that placed passengers and their safety at risk".

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Monday's Shareholder Meetings

Diageo

Time Out Group

Mulberry Group

Van Elle Holdings

Mereo BioPharma Group

Christie Group

Galileo Resources

Eddie Stobart Logistics - GM re financial statements

Challenger Acquisitions

Avon Rubber - GM re Team Wendy purchase

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Spire Healthcare Group PLC 160.40 GBX 1.52 -
Countryside Properties PLC 424.00 GBX -1.40 -
Carnival PLC 1,267.50 GBX -1.21

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