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LONDON MARKET PRE-OPEN: Playtech backs takeover; THG eyes FTSE indices

(Alliance News) - Stock prices in London are seen opening lower on Monday, after equity markets ...

Alliance News 18 October, 2021 | 7:46AM
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(Alliance News) - Stock prices in London are seen opening lower on Monday, after equity markets in Asia struggled to make headway as economic growth in China slowed markedly and fell short of expectations in the third quarter of the year.

IG futures indicate the FTSE 100 index is to open 21.8 points, 0.3%, lower at 7,212.23. The blue-chip index closed up 26.32 points, 0.4%, at 7,234.03 on Friday.

In early UK corporate news, wealth manager Schroders reported a rise in assets under management, gambling software firm Playtech has agreed to a GBP2.1 billion takeover, while THG confirmed that Chief Executive Matthey Moulding has given up his special blocking share, opening up the possibility of FTSE index inclusion.

The Playtech board has recommended a GBP2.1 billion takeover offer from Australia's Aristocrat Leisure, which manufactures gambling machines and casino management systems and also publishes mobile games.

Aristocrat's 429.2 pence per share offer is a 58% premium to Playtech's closing price on Friday. The offer values Playtech's equity at GBP2.1 billion. On an enterprise basis, meaning including debt, it values the FTSE 250 company at GBP2.7 billion.

The bid is "intended to be recommended unanimously by the board of Playtech".

Playtech Chair Brian Mattingley commented: "In recent years, Playtech has successfully repositioned its world-leading gambling technology and operations, expanding in strategically important regulated markets and driving major online B2B revenue growth. Whilst the business has made significant progress, most notably in the Americas, Aristocrat's proposal provides an attractive opportunity for shareholders to accelerate Playtech's longer-term value."

In late September, Playtech agreed to sell Finalto, its financial trading division, to investment vehicle and shareholder Gopher Investments for an enterprise value of USD250 million.

Sydney-listed Aristocrat has a market value of AUD29.24 billion, about GBP15.76 billion. It is a constituent of the ASX 20 index.

Manchester-based online retail platform THG is looking to rebuild investor confidence, after a disastrous capital markets day early last week resulted in a share price slide and left analysts and investors with more questions than answers.

Founder & CEO Matthew Moulding, "in furtherance of good corporate governance", plans to give up his golden share. The special share allows Moulding to veto any takeover bid for three years. It has been unpopular with investors and prevents THG from joining the FTSE 100 or FTSE 250 despite a market capitalisation of more than GBP3.50 billion.

"This cancellation will facilitate the group's application to step-up to the premium segment of the Main Market of the London Stock Exchange in 2022," THG explained. "A premium listing will permit THG to gain UK FTSE indexation."

Citing City sources, Sky News had reported on Sunday that THG, which trades as The Hut Group, was to announce plans to remove the special share rights.

Moulding added on Monday: "After the anniversary of our 2020 listing we feel that the time is right to make this next step and apply to the premium segment in 2022, thereby continuing the development of THG as we endeavour to deliver our strategy for the benefit of our shareholders, key stakeholders and employees."

Last week Tuesday, THG held its first capital markets day since it listed last year. It was planned to reassure investors but instead a lack of financial detail spooked them. The stock dropped 34% last week.

FTSE 100-listed Schroders said assets under management at September 30 totalled GBP716.9 billion, up 2.4% quarter-on-quarter from GBP700.4 billion.

Numbers showed that in the third quarter, there was a 0.2% quarterly hike in assets held in its assets management division alone to GBP527.2 billion.

Elsewhere among large-caps, National Grid said it is continuing to perform in line with expectations. It also expects underlying earnings per share this financial year to show a "marginally greater weighting" to the first half, which ended on September 30.

The Nikkei 225 index in Tokyo ended 0.2% lower on MOnday. In China, the Shanghai Composite is 0.3% lower, while the Hang Seng index in Hong Kong is down 0.6%. The S&P/ASX 200 in Sydney closed up 0.3%.

China's economic growth slowed by more than expected in the third quarter, official data showed, as the property sector struggled with tighter policy measures and an energy crisis loomed.

After a swift coronavirus bounce back, recovery in the world's second-biggest economy is losing steam, with gross domestic product growth coming in at 4.9% on-year, said the National Bureau of Statistics, citing an "unstable and uneven" domestic rebound.

Growth undershot expectations of a 5.2% hike, according to consensus cited by FXStreet. It followed a 7.9% expansion in the second quarter.

"It's not hard to understand why this morning's Q3 GDP has disappointed with the various port disruptions seen throughout the quarter due to covid restrictions, supply chain issues, as well as surging power costs and enforced shutdowns of the Chinese economy. The performance of the economy hasn’t been helped by the various crackdowns by Chinese authorities on various parts of the economy, as well as the problems around Evergrande and the property sector," CMC Markets analyst Michael Hewson commented.

Industrial production growth slowed further to 3.1% on-year in September, but retail sales picked up to 4.4% annually – markedly improving from 2.5% in August – with fewer virus containment measures in the country, which has imposed swift local lockdowns over a handful of cases.

Retail sales topped expectations of 3.3% growth, while industrial production missed forecasts of a 4.5% hike.

The dollar was higher early on Monday.

The pound was quoted at USD1.3721 early Monday in London, fading from USD1.3780 at the London equity market close on Friday. The euro stood at USD1.1574, down from USD1.1603. Against the yen, the dollar was trading at JPY114.31, up from JPY114.17.

Brent oil was quoted at USD85.82 a barrel early Monday, improved from USD84.73 late Friday. Gold stood at USD1,763.78 an ounce, down from USD1,773.75.

Over in New York, focus this week will remain on corporate earnings. Netflix becomes the first of the 'Faang' stocks to report during the current batch of quarterly earnings on Tuesday. Philip Morris International, Johnson & Johnson and Procter & Gamble also report earnings on Tuesday, before electric car maker Tesla's turn on Wednesday, Intel on Thursday and American Express on Friday.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
National Grid PLC 1,024.80
Playtech PLC 718.00 -
Schroders PLC 3,475.00
THG PLC Ordinary Share 172.70 -
Aristocrat Leisure Ltd 44.52

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