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LONDON MARKET PRE-OPEN: Barclays buys mortgage lender for GBP2 billion

Fri, 24th Jun 2022 07:51

(Alliance News) - Stock prices in London are seen opening higher on Friday following a rally on Wall Street overnight and a positive day in Asia.

In early company news, lender Barclays made an acquisition. The takeover of defence firm Ultra Electronics moved closer to completion. Energy industry services provider Lamprell received a discounted takeover offer.

IG futures indicate the FTSE 100 index will open 63.15 points higher at 7,083.60. The index closed down 68.77 points, or 1.0%, at 7,020.45 Thursday.

Barclays said subsidiary Barclays Bank UK has agreed to acquire specialist mortgage lender Kensington Mortgage Co for GBP2.3 billion.

Barclays is buying Kensington Mortgage from companies controlled by funds managed by Blackstone Tactical Opportunities Advisors and funds affiliated with Sixth Street Partners.

Barclays said the acquisition will enable the bank to "broaden its product offering and capabilities" in the UK mortgage market.

The takeover of Ultra Electronics by Cobham moved a step further to completion.

The UK government on Thursday said it was "minded to accept" remedies to address national security concerns raised by the GBP2.6 billion acquisition of the FTSE 250 defence specialist by former London-listing Cobham.

Kwasi Kwarteng, UK business secretary, on Thursday launched a consultation into the undertakings offered by Cobham to acquire Ultra, which makes submarine-hunting equipment as well as control systems for the fleet of Trident submarines that carry the UK's nuclear deterrent.

Ultra Electronics said that the proposed undertakings are now subject of public consultation. If the secretary of state's formal approval is received following completion of the consultation, the next key step for the acquisition will be sanction by the court at the scheme court hearing.

Lamprell said it has received a cash takeover offer from 25% shareholder Blofeld Investment Management, but at a deep discount to its current share price.

The United Arab Emirates-based provider of oil field services provider said it was considering the possible offer in light of its liquidity position and the funding requirements of USD75 million over the next two months.

Lamprell said Blofeld's proposal is at a "very significant discount" to its current share price and any acceptable offer would need to include an interim funding solution or bridge financing. Further, the pair have been in discussions for more than two months but have not reached agreement on the price.

Lamprell shares closed on Thursday in London at 22.10 pence, giving the company a market capitalisation of just above GBP90 million. The stock is down 66% over the past 12 months.

Lamprell said the board has been in "frequent discussions" over the last three months with its two largest shareholders, Lamprell Holdings and Blofeld, over a potential equity fundraise of up to USD150 million.

In addition, Lamprell said it ended talks, announced in March, for the sale of Oil & Gas business, which had yielded little progress.

"It became apparent during the course of negotiations that such a disposal on the terms proposed, would be highly problematic to execute and would ultimately leave the group without a viable business going forward. Furthermore, the board believes the proposal significantly undervalued the assets of the business," Lamprell explained.

Wall Street ended higher on Thursday, with the Dow Jones Industrial Average up 0.6%, S&P 500 up 1.0%, and Nasdaq Composite up 1.6%.

"European equity markets slumped sharply yesterday, knocked back by concerns that its two biggest economies could well be sliding into recession, after June flash PMIs slowed more than expected. US equity markets, on the other hand, have proved to be slightly more resilient this week, finishing the day higher, led by the Nasdaq 100, as the tug of war continues between the bulls and bears, as investors look to navigate a path between higher rates and recession risk," said CMC Markets analyst Michael Hewson.

"Because of the positive US close, and positive Asia session, European markets are set to see a positive open," he added.

In Asia on Friday, the Nikkei 225 index in Tokyo closed up 1.2%. In China, the Shanghai Composite was up 1.1%, while the Hang Seng index in Hong Kong was up 2.2%. The S&P/ASX 200 in Sydney ended up 0.8%.

Japan's consumer prices jumped in May, according to figures released by the Internal Affairs Ministry. The annual inflation rate in Japan was at 2.5% in May 2022, unchanged from April's seven-and-a-half year high figure and in line with market consensus.

The core consumer price index, which excludes fresh food, jumped 2.1% year-on-year in May. The rise follows a 2.1% rise in April, the first time since March 2015 that the figure breached the 2.0% set by the Bank of Japan as its long-term inflation target.

In the UK, Oliver Dowden has resigned as chair of the Conservative Party after it suffered two by-election defeats, saying in a letter to UK Prime Minister Boris Johnson that "someone must take responsibility".

In Tiverton and Honiton in south west England, the Liberal Democrats overturned a 24,000 Tory majority to win, while Labour reclaimed Wakefield in northern England.

The contests, triggered by the resignation of disgraced Tories, offered voters the chance to give their verdict on the prime minister just weeks after 41% of his own MPs cast their ballots against him.

Dowden said in his letter to the PM the by-elections "are the latest in a run of very poor results for our party".

The pound was quoted at USD1.2266 early Friday, up slightly from USD1.2260 at the London equities close Thursday.

The euro was priced at USD1.0535, up from USD1.0517. Against the yen, the dollar was quoted at JPY134.79 in London, higher against JPY134.56.

Brent oil was trading at USD110.15 a barrel Friday morning, down from USD111.15 a barrel late Thursday. Gold stood at USD1,823.60 an ounce, lower against USD1,837.04.

Friday's economic calendar has US new residential sales at 1500 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.

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