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Europe: Shire takeover, bid for Virgin Money enliven UK stocks

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[MILAN] Dealmaking dominated activity in UK stocks, with gains in Shire and Virgin Money, although the FTSE 100 index held steady after a public holiday and ended flat at 7,565.75 points.

A weaker pound had encouraged some earlier gains in the blue chip index, while mid caps closed 0.9 per cent higher and analysts at Accendo Markets said the market would remain supported by sterling's relative weakness to the dollar.

Meanwhile, M&A activity prompted sizeable moves among individual stocks, with Shire the top FTSE gainer, up 4.6 per cent at 4,034.50 pence, after Japan's Takeda agreed on Tuesday to buy the rare disease specialist for 45.3 billion pounds, raising the amount of cash in its bid to secure a recommendation.

Shire traded below the agreed 4,817 pence price, reflecting that the deal would only be completed next year, traders said.

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"We expect Shire shares to... trade at a relatively wide 10-15 per cent spread to the offer given close is not anticipated until the first half of 2019," Jefferies analysts said in a note, adding the offer price was reasonable.

Deals stirred up British mid cap trading too, after Virgin Money said that it received an 1.6 billion pound all-stock takeover offer from rival CYBG, sending its shares up nearly 10 per cent. CYBG, which owns Clydesdale and Yorkshire Bank, also rose, by 1.1 per cent.

Shares in other mid-sized lenders Metro Bank and Onesavings Bank were lifted by the sign of long-awaited consolidation among Britain's so-called challenger banks.

However, shares in Sky fell 1.6 per cent after US cable operator Comcast formally notified the European Commission of its intention to bid for Britain's pay-TV group, a source told Reuters.

Firstgroup was the biggest mid cap faller, down more than 12 per cent after US private equity firm Apollo Global Management withdrew its interest to buy the Bus and rail operator.

REUTERS