LONDON MARKET PRE-OPEN: Ladbrokes-Owner Entain Receives MGM Bid

(Alliance News) - Stock prices in London are seen opening higher on Monday, with vaccine rollouts ...

Alliance News 4 January, 2021 | 7:45AM
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(Alliance News) - Stock prices in London are seen opening higher on Monday, with vaccine rollouts fuelling hopes that Covid-19 will be less of a scourge to economies in 2021 than in the year gone by.

IG futures indicate the FTSE 100 index is to open 52.0 points higher at 6,512.52. The blue-chip index closed down 95.30 points, or 1.5%, at 6,460.52 on Thursday.

In early corporate news in London, Ladbrokes Coral-owner Entain confirmed it received a takeover proposal from US partner MGM Resorts International, while Ferguson said it has struck a deal to sell its UK heating and plumbing business Wolseley UK for a net GBP308 million.

"Stocks in China are showing decent gains, and European markets are expected to open higher," noted CMC Markets UK analyst David Madden.

Tokyo's Nikkei 225 index closed 0.7% lower on Monday. However, in China, the Shanghai Composite closed 0.9% higher, and Hong Kong's Hang Seng was up 0.8% in late trade.

The expected bullish start to 2021 in London comes despite a new national lockdown in England looking likely as the UK government was accused by the opposition Labour party of letting coronavirus "get out of control".

As events developed rapidly, the Daily Mail reported the government's key "Covid-O" committee that oversees restrictions was expected to meet on Monday to decide changes to the coronavirus regime.

The newspaper quoted a government source as saying ministers were looking at putting even more areas of England into the toughest Tier 4, which already covers a total of 44 million people – or 78% of the population – after changes which came into effect on Thursday.

Plans for a return of shielding for vulnerable people in England are being drawn up by the government, the Daily Telegraph reported.

CMC's Madden noted that Covid-19 infections have risen in the UK and in other European nations.

"There are fears that other countries, such as Germany, Denmark and Ireland will extend their lockdowns," Madden added.

On the London Stock Exchange, Entain, the gambling firm formerly known as GVC Holdings, confirmed a press report that it has received a possible takeover offer from US casino operator MGM Resorts International.

The Wall Street Journal on Sunday, citing sources familiar with the matter, had said MGM was looking to buy Entain which has a market capitalisation of about GBP6.63 billion.

The WSJ said the value of the bid was above GBP12.85 per share. Entain shares closed at 1,133.50 pence on Thursday.

Entain said on Monday: "Under the terms of its most recent proposal, MGMRI would offer 0.6 MGMRI shares for each Entain share. Based on closing prices on 31 December 2020, being the last trading day prior to this announcement, MGMRI's proposal represents a value of 1,383 pence per Entain share and a premium of 22% to Entain's share price."

The company said Entain shareholders would own just shy of 42% of the enlarged company under the terms of the offer.

Entain, however, said it told MGM the bid "significantly undervalues the company and its prospects".

"Entain shareholders are encouraged to take no action," the company added. MGM has until February 1 to make a firm offer or walk away.

The news comes after London-listed peers of Entain have received interest from the US or have moved to boost their exposure in the lucrative gambling market there.

Back in September, William Hill agreed to a GBP2.9 billion takeover by US casino and resort operator Caesars Entertainment. And in December, Paddy Power owner Flutter Entertainment struck a USD4.18 billion deal to own nearly all of the US FanDuel gaming business.

In other M&A news, Ferguson said it has sold Wolseley UK to private equity firm Clayton, Dubilier & Rice for GBP308 million.

In the financial year that ended July 31, the unit generated revenue of USD1.88 billion. The sale means Ferguson can "focus entirely" on its North American business, noted Chief Executive Kevin Murphy.

"The board's current intention is to make a return of substantially all of the net cash proceeds of sale to shareholders by way of a special dividend," Ferguson added.

Elsewhere in London, Martin Sorrell's media firm S4 Capital kicked off the year with a pair of acquisitions.

S4 said it has bought integrated agency Decoded Advertising and will combine it with its MediaMonks unit. It also has acquired Metric Theory, a digital marketing firm, which will merge with S4's MightyHive.

The news comes after "much of the uncertainty" related to Brexit has been eased, due to the UK agreeing a trade deal with the EU, S4 said.

"The company will now implement even faster its strategy of creating a new age/new era advertising and marketing services model and deploy its digital capabilities even more effectively, not only in Europe, but in the Americas, Asia-Pacific, Africa and the Middle-East. Further moves will be announced shortly," S4 added.

"The consideration for both Decoded and Metric Theory will be paid, as is usual, half in cash and half by the issue of S4 Capital ordinary shares, with minimum customary lock-ups and no earn-outs, which create fragmentation and hinder a unitary structure."

The pound was quoted at USD1.3690 on Monday morning in London, improved from USD1.3656 at the early London equities close on Thursday. The euro stood at USD1.2264, down from USD1.2273.

Against the yen, the dollar was trading at JPY102.97, down from JPY103.06 at the London stock market close on Thursday.

Monday's economic calendar has a raft of manufacturing PMIs, including data from the UK at 0930 GMT, the EU at 0900 GMT before the US at 1445 GMT.

China's manufacturing sector continued to improve in December, albeit at the slowest rate in three months, figures from Caixin showed on Monday.

The headline seasonally adjusted purchasing managers' index slipped to 53.0 points, still above the 50.0 no-change mark, but down from 54.9 in November and 53.6 in October.

The Japanese manufacturing sector ended 2020 with operating conditions stabilising in December.

Attention in the US will also be on Georgia and the state's two runoff elections which will decide which party holds control of the Senate.

"A win by the Democrats will leave them in control of all three legislative bodies and potentially an unfettered legislative path. If the Republican's win just one seat, they will control the Senate and will almost certainly make the incoming President Biden's life as difficult as possible. That almost certainly means no more fiscal stimulus and imperil any other initiatives that President Biden wishes to make," OANDA analyst Jeffrey Halley said.

An ounce of gold fetched USD1,924.04 on Monday morning, up sharply from USD1,894.00 at the London equities close on Thursday.

Brent oil was quoted at USD53.00 a barrel, up from USD51.10 at the London equities close Thursday.

Members of the OPEC group of oil producers and their partners will meet via videoconference on Monday to decide on production levels for February, hoping to turn the corner on a difficult year.

The OPEC+ ministerial meeting comes after oil consumption tanked in 2020 due to the Covid-19 pandemic and a price war between Saudi Arabia and Russia.

By Eric Cunha;;

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